In 2012 I organized a panel at SXSW Interactive called “My Financial Advisor is an Algorithm”. The first so-called “robo-advisor” startups like Betterment (now at 70,000+ customers) and Wealthfront (now with $2+ billion in assets under management) were already disrupting financial advisory.
But I wanted things to be easier still. It wasn’t enough for me to have the portfolio built and balanced by an algorithm. I also wanted to automate the questions about my risk adversity and the decision about how much to invest and when. If my Algovisor had access to all kinds of data, it would know more about me than any financial advisor would ever consider.
My Algovisor would be implicit and intuitive
It would know how old my house is, the heater, the washer, and how much I should set aside for any upcoming repairs or replacements. The same information would be available about my car. It would know I have a dog and a cat and how much I usually spend at the vet each year. My Algovisor would know what my job is, how much I make annually, and how that salary should develop over the years. Of course it would also know my spending and saving habits, without me having to say a thing about that.
I also had (and still have) the opinion that the best interface is no interface, and that the primary communication method should be via text messages. And that I should be able to choose how involved I want to be in the process.
What has happened to robo-advisors in the last 3 years?
It’s been three years since I presented these thoughts at SXSW. Many more so un-charmingly called “robo-advisors” have entered the market – Schwab Intelligent Portfolios being the latest. None go as far as I had predicted/wished for. But there are two enterprises with a slightly different focus, that I find most intriguing: Acorns, which launched last August and Digit, which entered the market in February. Both are focused on getting people to start saving as easily as possible. Acorns rounds up your everyday purchases and transfers the spare change into an investment account. Digit’s algorithm searches your checking account movements for possible amounts to save and automatically moves those into a savings account. While both apps (both are mobile only at this point) are not about building wealth or planning for retirement, they are closer to my vision of an Algovisor as any of the other robo-advisors: They are implicit. They make decisions (or suggestions) based on their users’ behavior. And – completely in line with my initial thinking – Digit communicates with you through text messaging.
So where is the Algovisor?
In my head, for now. I think that it is the next logical step into a future without financial advisors (or one where they turn into live coaches to stay relevant). What do you think? Would you be willing to completely hand over control, share all of your data? Is this the time? Do you want to build it with us?