A friend of mine loves discovering new places and has signed up for every off the beaten track holiday site imaginable. Over lunch last week, I asked him which of the sites he liked best.
“Secret Escapes,” he said without a pause.
Quizzing him further, I asked why he liked it so much, and his response rang true for what I’d heard from some about computer-driven financial services too.
Secret Escapes and this new era of robo-advice services offer a sort of online-matchmaking service. You tell them all about your likes, dislikes, and goals. Then, the services automatically match you with your ideal travel locations—or an investment portfolio. It’s quick and simple for the user. Plus, since it’s all computerized, it looks at facts, offers advice, and it’s cheap. The perfect solution to spot-on getaways and finance.
But are they really the perfect solution?
The answer is: well, it depends.
A visit to the Uncanny Valley
These robo-advice services remind me of a theory called the “Uncanny Valley.” To sum it up, it’s a hypothesis about the emotional response of people to robots.
As the theory goes, the more lifelike a robot appears, the more comfortable people are with it—until a certain point when the robot looks almost human, but still clearly isn’t. At that point, a person’s comfort level seems to plummet into an “Uncanny Valley” because the robot is—well, a bit weird. But the curve swings way back up again, when the robot becomes basically indistinguishable from a real person.
So now let’s apply this to online holiday finders and financial portfolio services. The better and more thorough the questionnaires from these robo-advice services, the more we tend to trust them. It feels like these services know us, and the advice they give is legitimate, if still a bit superficial.
But we’re only human, and if the “Uncanny Valley” theory is right, our trust has limits.
Where our humanity intervenes
Perhaps, we trust robo-advice for weekends away, because it’s relatively low-risk. If you don’t like a suggestion, you can dismiss it. If you go and don’t like the place, you won’t go there again. On the other hand, if the risk were more serious, like moving to that location permanently, no thank you. Not interested. We think to ourselves, a computer doesn’t know me THAT well.
So then how well does a computer know you when your finances are on the line? Would you trust robo-advice with £5,000 of your money? £10,000? £100,000? Would you trust it to build your deposit on a home in three years? Your pension in 30 years? For me, this is where it starts to get a bit difficult.
If I use the analytical part of my brain, I know that computers are faster, smarter, and can process much more information than a human is able to. Additionally, they’re emotionless, and therefore unbiased by personal thoughts that may skew a decision. Computers stay the course based on the information provided, whether this is accurate or not.
The thing is, people are emotional beings, and investing simply isn’t always black and white. A computer can never know if you’re worried about your aging parents’ health. And the investment questionnaire doesn’t ask if you’re planning to add to your family soon. It also doesn’t know whether you’re bullish and high-risk regarding tech, but bearish and lower-risk regarding oil.
So if a person wants the best return on their investment, with their personal concerns considered, what’s a human being to do?
A mixed solution
Some research we completed recently showed that people are comfortable letting the computer choose up to a point, but they still prefer the human touch to back up that final decision. Personally, until a computer is able to understand human behaviour and weigh its fact-driven approach against my emotional, gut instincts, I think robo-only advice is best left to choosing a beach or a top view. In the meantime, here’s a solution that could bridge the financial Uncanny Valley.
Financial services, like Investec Click & Invest, combine the best of both worlds: the quick, well-rounded calculations and analyses that computers are capable of, alongside the involvement and personal understanding of an experienced investment manager. When the two are used together, they can complement each other, allowing for checks and balances, so that neither computer, nor human, is too skewed toward its pre-programmed tendencies.
We already have computers capable of beating the world’s best chess player. So who knows, maybe a few more years down the line computers will be able to act as humans to make decisions based on even more complex information than they do now.
Opinions given within this article are my own personal views. My views and opinions are effective from the date of publication but may be subject to change without notice. I have no affiliation with the companies mentioned in this piece and all research has been independent.