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Wealth Owners Can Unlock Insights With Machine Learning

Copia Wealth Studios | Michael Sikorsky | Oct 7, 2021

NCFA Fintech Confidential article unlocking wealth - Wealth Owners Can Unlock Insights With Machine Learning

Did you know, society generates 1.145 trillion megabytes of data every single day? Most of us don't crunch numbers for a living, so organizing data and displaying it intuitively really matters. With all this data sprawling the planet, one of the most significant challenges is using it effectively.

Luckily, we can use artificial intelligence and machine learning in our investment portfolios to help us better understand the data. Yet, this idea can still be very overwhelming. Where do you start, and what do you track and measure? How do you know your data is working for you, and how does your data compare to your peers?

The good news is that artificial intelligence and machine learning work together with big data, making it easier than ever to benefit from the tech. One area this technology can be applied is to our own investment portfolios. After all, we're all looking for a more comprehensive understanding of our strategies and wish we could make much more confident decisions.

Artificial Intelligence and Better Data Visualization Are Your Competitive Edge

People have been trying to understand and exploit data for decades. From Bloomberg Terminals to Robo-advisors in your pocket, there's been an explosion of financial visualization tools for people of all skill and knowledge levels. They allow just about anyone to interpret signals and make predictions based on their own perspective. We can leverage those advances in visualizations and add machine learning algorithms to make the insights sharper and more helpful.

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Until recently, these algorithms were out of reach for the average investor. This is changing rapidly as today, developers build platforms and services that make deep learning accessible to everyone. There are obvious use cases such as interactive graphs or elegant charts. But from there, it's easy to imagine a world where your portfolio is benchmarked against others in a similar cohort, allowing you to fine-tune your strategy.

Using the right wealth management platform further allows wealth owners and family offices with complex portfolios to access these data visualizations and unlock a complete picture of their overall wealth in exciting new ways.

Fundamental Analysis

AI-powered visualizations can help investors gain perspective into what's going on with each of their asset classes. Adding algorithms to the mix can uncover hidden correlations between those same asset classes. From there, we can use this data to suggest which investment opportunities may outperform others and which positions we might have to reconsider.

Another example would be using AI to scan documents such as annual reports, economic articles, and other financial datasets to better understand a company's fundamentals.

In other words, AI can lead to a more healthy asset management strategy.

Stronger Portfolio Understanding

Artificial intelligence can also help us better predict future outcomes or expected returns, which can help with optimal asset weighting. This is like having a magical crystal ball. We can understand what our present-day portfolio looks like versus our dream portfolio with a couple clicks. We can run and re-run scenarios or ask the AI to help us know what might happen to our portfolio based on specific criteria.

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Algorithms are also capable of handling complex optimization problems. For instance, they can restrict the number of assets or set minimum holding thresholds. When you couple these ideas with user-friendly visualizations, things really start to get interesting.

Risk Management

AI can likewise help us analyze qualitative data, like news reports or social media, to assess the risk curve of a particular investment. It can forecast risk variables ensuring absolute risk falls within bearable levels, whatever those might be.

Another great example is assisting with transaction costs for large purchases. An AI can find the best prices for breaking up big trades into smaller chunks. These kinds of algorithmic traders already exist and use artificial intelligence (we just call them Robo-advisors.)

Artificial Intelligence Improves Accessibility to Data Visualization

These tools can supercharge your visualizations. Wealth owners can capitalize on the advancements and availability of algorithms to find insights in the same way financial analysts of the past did without the need to manually calculate outcomes.  We're all looking for ways to improve our portfolio management. It might be time to ask ourselves if the AI and data visualizations we use are up to the task.

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About the Author:  Michael Sikorsky (@mjsikorsky) is an EY Entrepreneur of the Year Winner, Deloitte Fast 500 Recipient, and serial innovator - he sold his first company to ThoughtWorks at age 28. His current company, Copia Wealth Studios, is a financial intelligence platform on a mission to Simplify wealth. He is also the Chief Investment Officer of his family office, Sky and Ray. Michael is passionate about education and has guest lectured at Harvard Business School, Stanford, MIT, Columbia Business School, and the World Economic Forum.

NCFA Fintech Confidential Issue 4 250 - Wealth Owners Can Unlock Insights With Machine Learning

This article is featured in NCFA's digital magazine, Fintech Confidential (Issue 4 Oct 2021). Click to read the latest thought leadership, insights and trends about Fintech in Canada:

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