Investment advice from Google and Amazon? It could happen
Money managers say they’re ‘working to innovate so we don’t get caught flat-footed’
“Alexa . . . will I meet my retirement goal?”
“You are not on track to meet your retirement goal,” replies Amazon.com Inc.’s voice-activated digital assistant, with not a bit of sugar-coating. Then she suggests turning over $76 a month to Fidelity Investments and its advisers.
This won’t actually happen if you try it on your Amazon Alexa device at home. It’s a demonstration put on by EMoney Advisor LLC, a company owned by Fidelity, in its offices in Radnor, Pa.
Amazon provides software for third-party developers to experiment with new functions. Fidelity is trying to find ways to apply artificial intelligence, computer algorithms, and voice-recognition software to the hidebound world of money management and investing.
There’s some urgency to the task. These days, investing firms figure they’ll either master the digital world or become yet another of Silicon Valley’s victims.
Each year, Fidelity gathers scores of technologists and executives to confront threats to the 71-year-old busi- ness, which manages $2.4 trillion (U.S.) and is one of the world’s biggest mutual-fund companies and retirement plan administrators. Like generals and soldiers in a war game, they sketch out what they would do in all kinds of scenarios, such as a market crash or a merger that created a super rival.
Just as ominous, perhaps, they ask: What if Amazon distributed financial products or offered its own financial advice? What if Google bought its own money manager?
Those tech companies could then do to the investment industry what they’ve done to businesses from publishing to electronics, squeezing already-shrinking profit margins and driving out established players. Even now, the soaring popularity of market-tracking index funds is pushing investment management fees ever closer to nil.
“We’re working to innovate so we don’t get caught flat-footed,” says Bill Doyle, head of research for Fidelity Labs, which oversees the company’s experiments in financial technology.
For now, there’s one big thing keeping the tech predators at bay: Getting into finance would pull Amazon and its ilk into closely regulated businesses. But Fidelity and others see no guarantees this will deter tech companies forever.
Customers in the U.S. are ready to trust tech companies with their savings. More than half of investors with assets of at least $1 million would consider using one of the top tech companies to manage their wealth, according to a survey by consulting firm Capgemini SE. Three-quarters of millennials would take a flyer on an offering from Google, Amazon, Apple, or payments companies PayPal and Square over one from their own banks, according to a study by media company Viacom Inc.
“All of us in this industry need to be sort of eyes-wide-open around disruption,” EMoney CEO Ed O’Brien says.
For now, Alexa, as an adviser, isn’t quite ready to disrupt. For one thing, she still has trouble recognizing you — and that’s a big flaw, because you aren’t just asking her to turn on the lights. What if a guest accidentally triggers the intimate details of your net worth and retirement plans?
Fidelity Labs is working on voice authentication, but it remains a work in progress. So it may be a while before the financial world updates the old 1970s ad slogan: “When Alexa talks, people listen.”