That's because at a certain point those things became time-saving as opposed to picking up a phone and asking someone to do them for you. Things will change to the exact degree that the robots are able to provide more real time-saving value than humans, meaning a higher degree of accuracy and satisfaction.
FTA:
>> Rich people don’t attempt to save money by agreeing to sit on hold.
This is the salient thing. If dealing with something for an hour saves you $1000, but you could have made $5000 doing something else for that hour, you won't deal with it (even if you don't, in fact, spend that hour doing something productive).
It’s not even that, if I could save $1000 but I don’t care about $1000 I wouldn’t do it. I wouldn’t sit on hold for $10. A billionaire isn’t gonna sit on hold for $1000 unless they have an axe to grind.
I'd quibble with that, depending on what you mean by "axe to grind". I'm not a billionaire,
but I'm fairly well off. My billing rate is $300/hr. Still, I don't like to feel ripped off. Spending my time not being ripped off does add some ineffable value beyond the monetary. Maybe this puts me in an unusual category of people who love having axes to grind, but I feel like I didn't amass my savings by letting things slide. If it's $10, I might let it go. But I'm currently taking a company to small claims court over $800 for breach of contract. So I guess I'm contradicting myself... but there also is another element which is that you can't become wealthy if you make a habit of allowing people to chisel you.
[edit] I don't think this contradicts the OP at all, because taking this company to court is the alternative to wasting my time talking to their robots.
> you can't become wealthy if you make a habit of allowing people to chisel you.
I remember a guy rudely criticizing my younger brother, who was a quiet, well-behaved little kid, for being wasteful because he took two napkins instead of one. Our family were guests on his $5 million yacht.
First generation wealth often have a quirky relationship with money. They're mulishly stubborn penny pinchers with some things, but spend money foolishly on other things. Some are completely allergic to all debt, even when it makes objective financial sense to finance a thing instead of paying cash.
I think it's just really hard to shake old habits that they worked hard to build and that served them so well in the past before they built their wealth, even if those habits are actually hurting them now.
Hah. I'm one of those who's allergic to all debt. What I've observed around me is that second- and third-generations almost inevitably slide into financial degeneracy and lose their wealth, because they don't have the habits you're talking about. "A penny saved is a penny earned" is something you can only really grok if you had to earn pennies. Even if that is a psychological kink... it's the kink that generates fortunes, rather than dissolving them.
"When I'm not feeling quite so prosperous, I might go with the $2.61: two sausage patties I put together. $3.17 is a bacon, egg, and cheese ... but the market's down this morning, so I think I'll pass up the $3.17 and go with the $2.95."
If uber billionaires like Warren Buffet thinks having a McMuffin for breakfast is being frugal, oh boy do I have some advice for them.
1/2 cup oats
1 cup water
a pinch of salt.
Put it in a microwave, turn on the microwave and let it do its magic.
Add som jam(but not too much) on top.
For the cost of his cheapest breakfast meal, I can buy at least a kilo of oats.
Having a McMuffin for breakfast every day is squandering almost a thousand dollars every year.
I bet he also has coffee to go with it, another small fortune wasted.
I mean, I don't even eat breakfast or lunch, so it's all a bit silly to me. But I say spend money on things that make you happy, as long as you feel it's a fair value.
I know exactly what you mean. Recently I was on vacation in a country where a cab would take you through town for a price which would not be enough to get a taxi driver in my country to even start the engine.
Of course some would charge you twice as much as others, which would still be very cheap compared to home, but that's not the comparison you make. You compare it to what the last taxi driver charged you and now you feel ripped off and disrespected by this particular taxi driver, even though now you are haggling about what is peanuts to me.
This is a great example because it shows just how relative "wealth" is, and makes the thought experiment accessible to anyone in a first-world country. It's just my conjecture, but I don't think most billionaires "don't care about $1000". The few people I've met with a net worth over $100M are sharp bargainers. I think the view that "they won't miss $1000" or "why would they care" is a fundamental misapprehension of the psychological make-up of wealthy people that's commonly held among people who don't have a lot of money. (And so when the wealthy do notice and care, the explanation would be that they must have an axe to grind).
The thing I hear again and again is that once money is no longer an issue, people realize time is the real asset, and people look to spend their time how they want to spend it, as it is the only thing they can’t buy more of.
Some battles need to be fought, as writing a check to solve all the problems can lead to people taking advantage of a person who has that reputation. But I’d wager billionaires are sending their lawyers to deal with those small legal issues and aren’t showing up themselves, unless they really have to.
> There are still some who still don't, but they are dying off.
I'm not sure what's more profound with that: the hostility or stupidity. Patience isn't going to win the day here; there is a fundamental truth to what the article is saying. If there is such a thing in the future as a financial advising AI for individuals _and families_ of significant wealth, it won't be anything like what serves the "mass market". The complexity is incomparable, in addition to the expectations.
There is an upside for not having to work through indirection.
There's absolutely no upside to talking to a robot. Or a "hold" line. And it's worth keeping in mind that for services, the money flows in the opposite direction - work is buying your time on the keyboard/screen, but you are buying a non-robot experience.
And rich people buying convenience won't ever die out.
I think it is possible for AI to actually deliver a better experience than an expert. Like with the trip booking example, the expert still has to look up the flights and so on but an AI can process them instantly. And with language models it seems possible to be as flexible as a human. I think the biggest issue is trust - nobody trusts an AI right now (and rightly so), but an expert has a reputation and that is really what the rich people are paying for.
>the expert still has to look up the flights and so on but an AI can process them instantly.
I get the idea though that the expensive experts actually have access to back channels that can allow them to skip right to the result.
So unless the LLMs also are granted access to these sorts of exclusive channels, how can they compete?
It's often who you know that will get you results. So who exactly do LLMs know? And will those people even interface with LLMs or provide a way for LLMs to interface with their exclusive resources?
FWIW, I don't think the author is talking about executives. I think he's talking about people on the level of ultra high-net-worth individual (UHNWI). People with roughly $30m or more in investable assets.
People like that prefer to be focused on exactly whatever their building, and babysitting the money is rarely that thing. They often approach their private wealth manager with a broad plan on goals, and the PWM goes out and executes them with light direction. There are lawyers and accountants in the loop as well, all working on paper to manage the cash pile. It's a long term, multi-generational relationship that often involves multiple parties, one of which is often some or many governments.
In addition, the PWM in this position prefers to get the client directly on the phone when possible. This is both to manage the relationship, and to sell novel finance products, often ones that aren't available on the open market.
Until we get AGI, it's just not quite there to be outsourced to AI. People at that level really prefer having a person be responsible.
Sure, but it’ll still probably be for the “I need two nights in Boca Raton midtown next week, make it happen, robo travel agent” type trip rather than “best of everything that suits my personal tastes” type trip.
You hit on a really core thing... another way to say it is that a robot can only sell the experiences that exist in some packaged form, and that in itself is exactly what UHNWIs explicitly don't want.
> There is a shortage of talent in the financial advisory space
Isn’t it self-evident that in general if you are good at this you would not be selling your advice? By definition, if you are good, you can accept the risk and win. Why charge a couple percent in fees when you could invest the money yourself?
Isn't this true of everything? If you were good at writing, you wouldn't work for the Wall Street Journal. If you were good at programming, you wouldn't work for Google. If you were good at cooking, you wouldn't make stuff at home for your family. All of that value you create could be captured and only used for yourself, and you're letting other people have it FOR FREE!!!
The fact of the matter is that a bound on theoretical returns is not what dictates people's choice of career. You have to consider the lower personal risk that you take on investing someone else's money and only getting a percentage of it versus investing your own money and getting 100% of it. You have to consider the aspect of being able to learn from others as you work, versus having no mentors when you lone-wolf it. You have to consider that being a financial advisor is not just looking at investments and making trades. Maybe they look forward to their 45 minute call with Jeff Bezos or whatever, and that's what driving them to that career option.
Finally, I think people are hiring financial advisors for prudence, not because they expect to beat the market. For example, how much of your money should be available in 1 day versus how much of it might be stuck in the market for 10 years because some politician made a dumb decision? How much of your stock should you sell this year in order to replace your roof, or should you get a loan? Nobody is expecting to beat the market; they just want to avoid doing dumb stuff that can be avoided.
No. I'm pretty good at financial planning. But what that means is that I'm good at getting standard market returns with acceptable risk. I don't beat the market or try to - that's not what most financial planning is about. It's about identifying a plan that will help you meet savings and income and retirement goals in a way that is realistic and works for you. Financial planning is much more about seemingly-boring things like tax-advantaged retirement contributions into low-overhead index funds than it is about flashy stock trades. What to hold in your tax-deferred accounts vs taxable. Tax loss harvesting. Roth conversations. Asset allocation. Estate planning.
It's really fun, but it's an optimization game, not a gambling game. There are basically a lot of known "right answers" and the trick of financial planning is applying and adapting them to the particulars of someone's situation.
Why wouldn't folks instead hire the market beating super-genius who could do all of the above, and deliver above market returns yoy, with acceptable risk, if given the choice?
I think that's the point the parent was trying to get at, it's an industry where all the best talent never become hireable in the first place.
Because those people mostly don't exist and you're not given the choice. RenTech exists but has to cap the size of their internal market-beatung fund, because their strategies only scale to a certain extent. They're a hedge fund, not a financial advisor - and they do indeed do what the GP said and just invest for themselves. Almost all other folks out there revert to the mean after a while.
But that doesn't mean there aren't good financial advisors. They're not helping you best the market, they're helping you ensure a good financial future within the scope of your existing wealth and income. They do apply their skills to themselves, but you need a job and a big base of money before s&p returns will make you rich. :)
Right, so the best talent don't ever become available to be hired. Because they would all be occupied working for themselves, or at very select firms, earning way more.
The equilibrium position is you can invest your own money, then take money off others, invest that too and take a %.
The danger zone is for small investors, where it doesn't make sense to advertise to them because the regulations are too demanding, margins too small and people tend to be flighty or need lots of hand-holding. That is basically why it there aren't "invest in stock!" signs on every ad stand.
And good financial advice tends to be boring and doesn't change much. The same strategy tends to work in all weather - invest a little bit in everything, invest a bit more in things that do well and try not to take on unnecessary tax burdens.
Taking a thin slice of other people’s money is more profitable than playing with only your own money if you (a) have lots of clients or a few really rich ones and (b) if you participate in the upside but not the downside.
Because you can risk other people's money instead of your own while learning. If you're successful then great, you'll get a huge bonus. If you fail, you may get fired but still you didn't lose your own nest egg. And if you succeed consistently, it's enough to build a track record and leave to start your own fund.
You don’t invest $100 and make $120 after a year for sure . You invest $100 and maybe an all knowing “god” knows the outcome but there is a probability distribution (a model which can vary based on opinion) for us mere mortals. Depending on your investment goals you might trade to have more risk and more expected upside. You may diversify away from US to mitigate US specific risk but maybe such a portfolio wont perform as well long term.
Liquidity. Investing a million vs. investing billions needs different approaches. Someone doing something sophisticated may only be able to invest so much without revealing their hand. Someone investing a million people’s pension will act differently and probably more prosaic and predictable. No one will fire you for turning 100k into a million over someones lifetime but they will be angry if you turned it into nothing.
A typical scenario for say a pension (aka superannuation, aka 401k) is that when you are young you go for higher short
term risk and higher potential growth mix of investments and as you get closer to retirement you derisk.
The idea is that a crash when young is no issue as the market will recover and probably you’ll get some bargain stock soon after.
When you are older you don’t want to lose 20% of your savings to a crash so more money gets diverted into lower risk stuff.
The point is that there is not one investment strategy that suits all. Therefore there is a place for fund managers to provide different risk profiles. They aren’t really getting alpha but they are useful nonetheless. They won’t be picking stocks based on trading ideas.
To compound this, these large funds deal with billions of dollars. If you place a market order for a billion dollars people notice. Just like if you had to spend a million dollars on ebay on used apple watches you are going to affect the price of those watches because of your bids. Therefore they will find it hard to seek alpha anyway.
The point is there is a place for funds that might seem like “dumb money” but just broadly follow indices and there is a place for traders with a model and a theory to try and beat the markets.
Financial advisors generally charge a flat management fee (for example 1% of AUM).
Hedge funds generally charge a management fee plus a performance fee. This is why hedge funds and other similar structures are much more lucrative and acquire more talent.
I think this is a misunderstanding of what wealth management is. I have friends in private banking who have told me that some of their clients are hedge fund managers and they aren’t looking for stock advice, but more for things like tax help and succession planning. And a banker who will see to it that they can get their yacht financed using their Rembrandt as collateral, since even billionaires don’t necessarily have much liquidity.
People who are good at finance also tend to be risk averse and long-term planners. The great part about charging a fee is that you get to charge it even when the market dips.
The best financial advisors are going to help you diversify your assets, and, more importantly, minimize taxes. They're not telling you to YOLO on crypto. There's only so much buying the S&P 500 can do for your returns with limited money. Best to advise someone rich on how to do it.
Let's say I have $100k to invest, and can beat the market by 10% a year which is unrealistically good. I could make $10,000 a year extra with a decent amount of savings. I suppose leverage can increase this, but you see the point, right? If you lack serious capital then even a strong edge is not worth as much as a part time job at a fast food restaurant.
Depends on what counts as worth.
Ultimately you cannot finance yourself out of the system without enormous wattage.
So, this job thing you're talking about, at some point it will happen you, if even by taking your time, your children and family time.
There's likely a level where is really not worth any money to have one of those traditional contracts taking your time and energy for cash. That threshold is probably not as high as it seems to be, if not for land and housing prices.
If a person has skills, but isn’t already wealthy themselves, taking that 1% of a large fund is how they can generate wealth.
Building wealth takes money and time. The money needs to come from somewhere.
For those who are good, who have been doing it for a long time, and are wealthy, it gives them something to do and a reason to get up in the morning. There is a lot to be said for that.
No, it's a job. Sound investment management is just a lot of work, and takes education, training and experience. It isn't about "get rich quick" after some point; it's about staying rich. Right?
Even if you are great 2 millones fortune isn't happens over nigrh whit salary of 12k, being good financiar advisor means you give good financial analysis not that you, can afford the mortgage of house, because you get layoff for year, you or neer family don't get sick out of coverage, are alcoholic,why aren't already Rich too have already enough money so your own income isn't important in in your revenue at 45, you are bad financial advice if at 70 you can't afford retirement whiout having catastrophic circumstances
For those who don't know, Josh Brown runs Ritholtz Wealth Management and hosts The Compound Podcast [1]. Probably one of the most insightful finance podcasts that covers a wide range of topics.
Everything about the author's description of the "dream vacation" sounded awful.
A proper vacation is being able to spend 2-3 months abroad and taking it easy with no specific plans. The author describes a highly optimized itinerary where every meal and every day counts. Sounds like more stress than a vacation.
Sounds to you, and to me too.
However there is as many different ways to do vacations as there are people. Some like to do nothing on a beach for days, others to live an adventure or meet people.
I can totally understand why you want a totally optimized trip if you have money and little time. And I am sure part of the 25k€ package mentioned is spent on planning with enough time or options to avoid stress.
I think that’s one big difference between American and European life.
Americans have more money, but Europeans have more time and stability.
In my opinion though, if you’re affluent enough to go on 25k vacations, why are they not affluent enough to take several months off at a time to actually enjoy a proper time off?
Both is possible. I do sometimes make vacations unplanned with no return flight ticket and just enjoy the time there as long as I feel to.
But then there are specialized holidays, where you need people to be with you. One example is my hobby being a diver. Going on a private diving safari needs planning and documents. Depending where you go are the documents, but you still need a boat, a crew and a dive guide and/or trainer.
It's still very enjoyable for me, as I love diving, but it also needs planning.
I can imagine going to a Taylor Swift concert: being able to have reserved tickets at prime seating with backstage meet & greet afterwards would be a different level compared to stuck in parking lot and standing in crowded unreserved area.
AI investing isn’t about selling to wealthy people, it’s to sell the middle class the idea they can invest like the rich at a fraction of the cost, and with a lower barrier to entry.
I'll go a step further and say that nobody _wants_ to talk to robots. Robots are simply too inflexible and cant respond or be reasoned with. AI for service jobs is going to go the same way as chatbots: companies saw people liked chatting rather than calling or emailing, so they automated that, but locked it down so much that the chatbots were basically a dumber version of the same menus already available. AI's going to be the same way: companies will see that people like talking to people, they'll use AI to try to automate customer support, they'll lock the AI down to a handful of possibilities and completely miss the point of why people preferred talking to people in the first place, some startup offering this service will be valued at $10 billion
I disagree. I suspect with current technology even they will be able to provide the AI with backend functions it can call and then let it handle the support and calls to the functions.'
It'll be a lot better than current 'select a few options' chatbot support than we have.
There wasn’t really anything beyond lack of will that stopped companies from hooking up existing chatbots to backend functions so they could accomplish the most basic support tasks beyond searching a knowledgebase, so I’m not sure there’s a strong case that they will now, just because the language models are more powerful.
If anything it’s a bigger risk to the company–an LLM with broad access to genuinely useful account management tools could easily be manipulated into doing things it shouldn’t, so it would have to be implemented very carefully.
> And the number one thing you do when you have lots of money is you pay people to deal with stuff.
Deep wisdom here.
Chatbots and LLMs are for peasants. You know you're going to have to deal with a Comcast LLM soon. It'll be more useless than the existing customer service.
This is definitely an "old man yells at clouds" post. The author seems to believe that future AI-driven investment systems will work like ChatGPT and so will need to be "talked" to, which is bizarre. By 2040, human financial planners will have gone the way of the human computers of the 1940s.
Me neither. Besides, there is this enduring confusion all over the place that "AI := LLM". I'd expect the radical AI (ML) innovations to be somewhere else in the long-run (like, say, in robotics, as hinted by the title but downplayed by the text).
I know plenty of people on that upper end and slightly above (as is common for upper middle class older people). None of them have 'personal assistants'.
You are in agreement with the author. His definition of 'rich people' is "the traditional bread-and-butter client for registered investment advisors of $1 million to $25 million in household wealth". The $100,000 - $1m asset class he refers to as the 'mass affluent' are who he concedes might be a market for 'roboadvisors'.
I think this person is probably right about AI, which I think may destroy society, and yet I still want him to be wrong, because it regularly revolts me that we have to care about the thinking strategies of high net worth individuals.
Try to stop caring what rich people think for at least a day or two per week and focus on what poor people think, and maybe we won’t all end up shouting “Jo-na-than!”
Experts are overrated - especially at the top end.
You end up with in-network people, which is different from having very good people.
LLMs are useful because they're a diverse range of experts that are composable and immediate. We've never had something quite like it, and many people are still struggling to understand how to use it.
Most of this talk sounds like the kind of denial that a lot of people on HN were doing when LLMs were first seen as a way to write code. Well, they do write code. They make us more effective, so maybe we need less of us in the future. Or maybe the pie grows because the kinds of things LLMs enable mean there are just more tasks developers can do, and so more developers are needed.
Either could be true. The denial is built of fear.
Also this guy's tone is pretty repugnant. Like, who thinks and talks like this? Seems comically retro. The only ones I know are those who derive their identity from money, whether they are rich or not. Mostly not. Ironically, a pretty poor existence.
Edit: grammar checked with an LLM - not an expert.
I think the bigger problem with broadly available AI advisors is that its too easy for institutions to know in advance how the retail market will react. It's not good to be part of a large, predictable retail class of investors.
Using LLMs for portfolio recommendations is overengineering imo. The typical person does not have such specific requirements that they need some huge model deciding on a custom portfolio for them.
There are still some who still don't, but they are dying off.