Phil Falcone has a net worth of $2.2 billion. He rose from a childhood of extreme poverty.
Lloyd Blankfein, son of a postal worker, has been paid $137.74 million as compensation over the last five years.
Falcone invested in hedge funds and Lloyd Blankfein hitched on an investment banking ship. The investment world is replete with experiences of people creating fortunes with investments in hedge funds and smart asset management. The list is unending and is followed by many well- heeled names including Glenn Dubin, Leon Cooperman, T. Boone Pickens and George Soros. In all probability every other rag to riches tale (if not all of them) is an asset management accomplishment.
Human ambition is insatiable. With swelling profits from investments over the years investor demands too have spiked. Now, in addition to startling profits, they expect lower fees and less time to achieve the same. Few have figured out their way up but most are still juggling with infinite sets of permutations and combinations.
But laziness has always been a costly affair.
Conventionally, Asset Managers were in a habit of creating strategies based on tried and tested data, hoping and craving for similar results to reappear. Those who had deviated from this track had often taken the arbitrary route that lacked in definite direction and was paved with obvious pitfalls of judgment mistakes, discipline breakdowns and risk management. Asset Managers realize it too. 60% of Asset and Wealth Managers are afraid of losing their business to emerging Fintech companies. But time has shown us that some of the best opportunities come in the guise of threats.
Traditional methods have failed and both first-time investors and seasoned veterans, and now they are keeping their hands off from both hocus-pocus and serendipities. They seem to be yelling at top of their voices on three-story high amplifiers “Show me the money” and “Show me the way”.
The way things have turned up we wouldn’t even think of the consequences if AI and Blockchain wouldn’t have arrived. These technologies have diverted the asset management tracks from lunacy to careful forethought. A savior descended right on time. Edgar Radjabli, the Managing Partner of Apis Capital Management, said “higher net worth investors who can invest in hedge funds are looking for funds that significantly and consistently outperform the market. To do so, those asset managers need to develop strategies that are more advanced than ever, and that is where AI comes in.” Apis Capital Management is an asset management company that is using blockchain and AI to make everyday decisions.
When it comes to financial transactions, trust is paramount and who can foster trust better than blockchain. A harbinger of the Third Wave, blockchain is assisting in facilitating new-age administrative models. Traditionally this was done with the use of a third party administrator. Among other limitations was the difficulty in monitoring many shareholders. Blockchain protocols enable the investor to manage diverse Asset Tokens from a single account.
Here’s how this can be done:
The user opens a new account→ A smart contract is generated→ Blockchain does a record check and approves/ disapproves the account→ Approved accounts get documentation link→ Details of new financial relationship are captured→ App secures funding through automated transfers
Along with the operational efficiency come increase security, speed, faster client onboarding and regulatory compliance. Smart contracts automate certain crucial tasks and make the process smooth and swift.
Whether AI will augment financial advisors work or it will replace them completely is something that is yet to be seen. For now, big Wall Street labels like Morgan Stanley are using it. The company’s Next Best Action initiative uses machine learning to evaluate emails, texts and other documents from clients to arrive at suggestions. This gist is then floated to its 15,000 financial advisors and 20,000 employees. The tool also helps notify the company’s clients when their stock is downgraded by Morgan Stanley. One important benefit that has emerged out of Next Best Action is that the financial advisors now have more time in their hands and can use the same for forging better relationship with their clients.
Wealthfront with its application named Path is giving retirement solutions to its clients. The feature suggests when its clients can retire, how much home expenditure they can make and which neighborhoods they can afford to live in.
An unprecedented trend has cropped up and now according to Wealthfront the average client with age around 32 actually prefers non-human contact. Avaamo had a similar experience to share when its clients preferred virtual assistants saying “Hey, we like the virtual assistant because it doesn’t lie. It’s not trying to sell me something. It’s very factual.”
Whether technology will replace Asset Managers is yet to be seen. Experts say we will have a fair idea by 2030. Until then, Asset Management will continue to be the Shangri-La of the aspiring. Blockchain and AI give us the hope that this fabled Eden could be very real and very gettable. So we would like to believe.