Advisors Should Embrace Artificial Intelligence
Jacob Miller is the co-founder and chief solutions officer at private markets platform Opto Investments in New York. In this interview for etf.com's Advisor Views, Miller told Wealth Management Editor Jeff Benjamin why investors should be considering investments in the artificial intelligence space, calling it "a defining shift for the next decade."
Jeff Benjamin: Why is it important to invest in artificial intelligence?
Jacob Miller: Innovation waves, which are fundamental shifts with broad impacts on the economy and how we live, tend to be fundamental drivers of value creation over decade-or multi decade periods. Pulling the camera back, railroads gave way to electricity and cars, which gave way to aviation and transistors, which gave way to personal computers, which gave way to the internet.
Each one of these trends provided a decade or longer secular wave, where intelligent diversified investing produced robust results for portfolios.
While it can be difficult to fully spot the wave while you are riding it, we see AI as a defining shift for the next decade.
Pretty soon, it will be hard not to invest in AI in some way shape or form, as tools start to permeate across industries.
JB: How do you implement an investment strategy in AI?
JM: If you own parts of the equity market, you likely already have some exposure to AI. There are several ETFs that give you exposure to Nvidia, Microsoft and Palo Alto Networks.
However, these public companies, while they are an important part of an AI-cognizant portfolio, may not offer as pure an exposure, or as much upside as the wave unfolds given their higher starting points and more mature footprints.
We recommend thinking about access to early-stage companies through venture capital firms with expertise in data and deep technology, who are backing the companies which will end up powering much of the infrastructure to support this wave.
JB: Where are the most intriguing opportunities in AI today?
JM: Many of the most exciting opportunities to us are outside of the very visible spaces like chat and image generation. There are exciting, and less overbought applications in hardware and network optimization, healthcare, and finance. The place I am most interested in are use cases for AI addressing a big headwind for the global economy: defense and cybersecurity.
Security is often overlooked when the AI innovation wave is discussed.
JB: What if AI is just a fad?
JM: There will likely be frothy valuations in parts of AI at certain points, just as with any investment or asset class, and advisors should conduct their usual due diligence when evaluating any opportunity. With that in mind, our simple framework to help inform your due diligence and analysis includes does it have intrinsic value, is it relevant today, is it being heavily financed and are insiders looking for exits?
While there is certainly some hype in AI, there are real applications that make this far from a fad, and fundamentals point to this not being a bubble.
JB: How close are investment advisors to being replaced by AI?
JM: We don’t believe financial advisors will be replaced with AI. Certainly not soon and probably not ever. Computers are great at solving problems, but there is a right answer.
The financial future of individuals and giving them the guidance they need to be comfortable with their financial health is not a solvable problem. There are too many unknowns, too much is driven by soft inputs vs hard data, and the world can change in ways that models would struggle to predict. This is still a uniquely human problem, and human advisors will be needed for a long time yet.
That said, AI has the potential to greatly increase efficiency.