We all know it’s better to buy low and sell high, but when the market is volatile; you’re likely to do just the opposite. You panic and sell when the bottom is about to drop out, only to turn around and buy when things are looking up.
What if there was an automated behavioral prompt to jump in and stop you from making a stupid mistake with your money? According to an article by Simon Constable, some financial firms are doing that by using artificial intelligence.
To keep you from making mistakes that will cost you, these prompts can “help nudge individual investors to make better financial decisions. That can include a multitude of things from sticking to a budget to picking investments.”
The prompts are “fueled by analysis performed by artificial intelligence.” David Eckerly of Personal Capital explains how “the company analyzes information from customers’ accounts to identify spending patterns and how their savings and investments are allocated. It then uses the findings to make suggestions to the individuals that could help improve their finances. This is all data-driven and specific to the people based specifically on their situation.”
Avoiding Buying High and Selling Low
Instead of sending messages to all clients, which may cause more anxiety, Betterment reaches out to clients who are logging in. They will advise investors who want to sell or reallocate their holdings “by informing them of the costs involved. The message will include the potential tax liability of a trade and the potential cost in terms of lost retirement income from reducing their holdings.”
Those receiving these messages have been 62% less likely to make the change than if they hadn’t received the advice.
Personal Touch and Artificial Intelligence
Instead of only AI generated messages, other financial advisers also employ a personal touch as well as an email or blog to help their clients.
A wealth-management firm based in Oregon and Washington state says, “it is informed immediately if multiple clients suddenly start logging into their accounts. That guides them to see what is happening. They will then issue a broad email message or a blog that addresses what’s going on.”
Julia Carlson, founder and CEO of Financial “Freedom” Wealth Management Group observes, “A personal touch can help avoid missteps. In late 2018, when the market fell and spooked some of the firm’s clients into wanting to sell, the company was able to personally advise each client on what to do. They like that a client has to come through us and not make those emotional decisions without human interaction.”
See related post HERE.
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