Will IBM’s Watson Make Your Financial Advisor Obsolete?

by on Feb 13, 2014

It’s been three years since IBM’s artificially intelligent computer system, Watson, competed on Jeopardy and manhandled the game’s best champions. At the ibm_watsontime, Watson had access to over 200 million pages of data, including the entirety of Wikipedia, within its four terabytes of disk storage but was not connected to the internet. Answering questions posed in “natural language” in real-time, Watson was able to win the two day tournament with a total earnings of $77,147 (Ken Jennings who placed 2nd finished with $24,000).

While Watson has been out of the public’s eye in the years since, the supercomputer has continued to grow and develop new skills and areas of expertise. Since February 2013, nurses at Memorial Sloan-Kettering Cancer Center have been using Watson for guidance in decisions for lung cancer treatment. Additionally, Watson has recently been put to work trying to help customer service representatives answer customer questions more effectively.

Watson in Finance
While Watson’s new capabilities are certainly intriguing, most of what Watson has been doing does not impact the average person’s daily life. That’s about to change as IBM has announced how Watson might soon become an investor’s new best friend. IBM has partnered with several financial institutions to teach Watson the ins and outs of the financial world. The partnership makes perfect sense as the supercomputer can perform deep content analysis, reviewing thousands of pages of financial news every day. Based on its analysis, Watson can offer hypotheses and help make decisions about investment choices, trading patterns and risk management.

Meet Watson, Your Future RIA
Fortunately for the consumer, IBM has recently taken large steps to commercialize the supercomputer. In January 2014, IBM announced a $1 billion investment in Watson, with the goal of finally having Watson generate revenue for the company. IBM has been able to dramatically increase the speed of the computer, while also decreasing the size. Watson is 24 times faster than it was in 2011 when it appeared on Jeopardy and has seen a 2,400% improvement in performance. Coupled with the fact that Watson has shrunk from the size of a master bedroom to that of three stacked pizza boxes, shows how far IBM has progressed with the computer. The logical next step as manufacturing technology continues to develop is a handheld version of Watson, possibly the size of a cellphone. Once consumers have a personal Watson in their pocket that can analyze the market and trading trends in real-time and offer investment strategies based on deep analysis of the current and future market outlook, why would an experienced investor need a financial advisor?

Though advisors may have to worry about Watson making their job obsolete at some point in the future, the near-term holds a much more positive outlook. Watson may become an invaluable tool for financial advisors, allowing them to fine-tune their investment strategies for clients and helping them to monitor and manage their accounts more successfully. Meanwhile, investors will feel greater confidence in their advisor knowing they are making decisions based on deep analysis of market trends, and not just on a gut-feeling. Whether Watson is in the investor’s hands or the advisors, the computer has the potential to make a dramatic shift in the way people invest. Either way, the financial future for many people certainly now looks a lot smarter.