The crowd and financial advice

financial-adviceI’ve written a few times about the growing role of computers and AI in managing our financial affairs, with a number of services now offering automated portfolio management.  The rationale is that AI is less prone to the kind of irrational decision making that so often befalls human beings.

Does the crowd stand a better chance?  A couple of startups are attempting to tap into the power of the crowd to provide better financial advice.

Crowdsourcing financial advice

One such project, for instance, is Vetr, who aggregate predictions on stock movement over the coming months in the hope that these aggregations will prove more accurate than individual predictions.

Or you have Openfolio, who take a more social network based approach to matters.  Investors on the site can share their portfolio with other users of the site and solicit tips and advice from the crowd.

An open approach to investing

Such approaches are fascinating because they break with the belief that investments should be something that is secret and kept to oneself.  You’re competing against your fellow investors rather than collaborating with them.

On Openfolio, for instance, this is flipped on its head, with investors sharing all aspects of their portfolio, including the stinkers that they would much rather forget.  Whilst the actual sums involved in each investment are kept private, the performance itself certainly is not.

The success of the site shows that people are generally only too happy to open up their portfolio, with the belief that doing so will benefit them the core motivation.

Financial predictions

Vetr takes its cue from the wisdom of crowds and tries to provide a prediction market for stocks.  The aggregated predictions for each stock are provided as a crowd rating and a crowd target price for each stock.  At the moment, the userbase is probably insufficient to really gain from this approach, but hopefully over time it can be more rigorously tested.

Whether investors turn to automated traders or to one another, there is a slow and gradual shift away from relying on the insights of ‘experts’.  This marks a continuation of the trend that began when the very act of buying and selling shares was made more available over a decade ago with the launch of services such as eTrade.

Will financial advisors eventually go the way of the travel agent and slowly slide into oblivion?  It’s certainly likely, and the number of financial advisors operating in the US has been in gradual decline for some time.

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3 thoughts on “The crowd and financial advice

  1. Anything that takes things out of the hands of overpriced 'experts' is a good thing imo. They're usually guessing just as much as the rest of us!

  2. Good to know some amazing details regarding the growing role of computers and Al in managing our financial affairs! The new offering of automated portfolio management seems to me highly effective. I’m looking forward to check out these facilities, as a startup I’m looking forward to implement these financial advice.

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