Intelligent Advice - Merging Technology with Human Wisdom
Asking the right questions has never been more important. This article explains how to combine practical advice with technology to drive informed planning decisions.
KEY TAKEAWAYS
- Emotions cause irrationality and support the need for experienced, personal advice to complement the analytical power of technology.
- Following a rational appraisal of objective facts (system) to reduce mistakes that are common when relying on subjective opinions is the only way to provide consistency.
- Asking the right questions allows us to turn information into wisdom and safeguard our clients’ assets. We embrace technology with human wisdom to help make better informed decisions for our clients
Recent media coverage has sparked a debate surrounding disruptive technologies and the prospect of replacing humans through lower cost computer automation. To some, change creates uncertainty and a feeling of displacement, while others view it as an opportunity for increased efficiency through innovation. The displacement of jobs and adjustment period the follows attract a variety of journalistic opinions questioning the status quo.
The public discourse and tension surrounding the technological impact on various industries is part of the process and helps to create the terms on which the updated systems play a role in our daily lives. It is important for those affected to take notice of entrenched biases and seek education on the benefits and drawbacks of the evolving landscape.
Take the financial industry, where the incumbents are being pressured by a new breed of startups offering solutions to enhance our ability to quickly make investment decisions using data. The emerging offerings have allowed investors of all sizes to get started towards building their nest egg after a few clicks on their mouse. By asking three basic questions these electronic advisors provide guidance and an investment portfolio built to satisfy your future goals.
While these computer algorithms democratize the delivery of investment advice they come with drawbacks as well. One of the main issues with overly simplifying the decision process is neglecting to address key qualitative aspects of one’s life prior to charting a course. The ability to answer important questions such as, “How will I get to where I need to go?”, “What is the impact should I fall short of my targets?” and “How can you help get me on track?” are vital to creating trust and adhering to a long term plan.
Our recent investment history has been relatively smooth and without any major corrections making the robotic systems like a simple alternative. The long term has yet to be tested and without the wisdom provided by human experience there is increased likelihood that the trust in computerized advice will diminish whenever instability arrives by incorrectly relying on our emotions as the basis for action.
As the graph below illustrates, the combination of human behavior and our perception of risk
dictate buy and sell decisions. The study shows the amount of money flowing into and out of the stock market at inopportune times, a large withdrawal at low prices and an influx of investment at high prices. This demonstrates how emotions cause irrationally and support the need for experienced personal advice to complement the analytical power of technology.
“Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.” - Jason Zweig
We believe in order to deliver intelligent advice there must be a focus on merging the analytics of technology with the wisdom of human advice.
Following a time tested system to guide investment decisions allows for the development and execution of a disciplined plan. Predefined rules and principles outlining buying and selling decisions, asset allocation and long term planning allow us to clearly communicate how we plan to achieve the targeted goals. Often times it is the wisdom learned through experience in conjunction with a well thought out plan that bring success by preventing decisions that are otherwise made on a hunch.
We believe that part of the answer is to utilize a platform to filter the vast amount of rapidly developing information is essential to gain the required knowledge and understanding to make informed decisions. Learning from the advice of esteemed investors such as Benjamin Graham we follow a rational appraisal of objective facts (system) to reduce mistakes that are common when relying on subjective opinions. Couple our technology with tangible wisdom while taking notice of the nuances associated with regulation and tax law to identify opportunities to improve results.
“The goal of the advisor shouldn’t be to beat the market by picking stocks or winning funds.
Advisors add value by providing the discipline required for successful investing. They add value in areas like tax efficiency, risk management, estate planning and retirement planning.” - Jack Bogle
Asking the right questions allows us to turn information into wisdom and safeguarding our clients’ assets. The beauty behind Fact Based Systems is that a system can be designed to filter through specific time tested parameters in order to quickly and efficiently find opportunities consistent with each client’s needs and risk appetite. We can then make decisions to eliminate our counterproductive internal biases and increase comfort understanding and weighting the consequences of falling short of a specific goal.
Our group has always embraced technology and change as we strive to learn, upgrade our investment strategy, planning techniques and client services to refine and improve the value we deliver.
The views of Ryan Gerstel (Gerstel Wealth Management) do not necessarily reflect those of CIBC World Markets Inc. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors. This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.
