ITHINK it is safe to say that most people know, if not like, that our internet patterns and preferences are logged, stored and used to suggest items of interest, places we might like to go, things we might like to eat. But how would you feel about
The thought may never have occurred; it hadn't tome until last week.
But the concept of technology-based financial advice is a real one, and no doubt some say a credible one.
I am not referring to signing up to an existing online broking service, but to the potential for investment advice services to be operated by social networking sites, perhaps dating sites and the like - large organisations whose operations rely on collecting user data.
It is quite easy to see how it might work. Our internet activity is a window on our personality, our personality shapes our preferences, and our preferences are reflected in our consumption.
Plenty will be hidden within our internet behaviour that might just help a large collector of data, such as a social networking site or a search engine, to make a reasonable guess at where we might like to put our wealth.
One of the web's greatest assets is its ability to quickly and efficiently reach a quite enormous marketplace.
Another is its ability to gather data on billions of people.
These two factors could cooperate to deliver investment advice to a mass market which will demand more and more in the years ahead.
But there are so, so many potential pitfalls.
The principal one is that advising someone based on such data is basically a guess.
I hesitate even to say best guess.
Investment advice is not, and should never be, a nebulous process.
It is precise, tailored, personal and detailed.
That is because it has to be.
Technological change moves on apace but nothing will ever change the individuality of your financial situation and it is this which shapes your investment goals.
I realise that the process will be a little more sophisticated than providing investment recommendations based on what strimmer you bought recently.
But a sound investment strategy must reflect your specific financial situation, and, so far as I know, suppressing my cynical side, details of my income, assets and financial aspirations are not sitting in
And what of diversification, of risk management?
I am sure it might work for some, but to my mind there is no way such a system could guarantee risk was managed efficiently and in tandem with the investor's own attitude to it.
We would, potentially, be looking at a situation where the decision to invest is made after a few clicks.
With human involvement this process is more measured, taking time to get things right, identifying the nuances that I do not believe a computer could.
With human advisors, there is interaction, rapport and accountability.
Last week, I wrote about behavioural psychology in investment.
One concept I did not touch on was domain dependence.
This covers the tendency to assume that your skills in one area transfer into another, when often they do not.
As much as I stand to be corrected, I do wonder whether or not large nonfinancial corporations would make a successful transition into the advice field, conceptual though this idea is at this stage. Crucially, I just do not think the relationship between client and investment manager will ever be adequately or safely replaced by technology where the person's needs are anything more than basic.
ITHINK it is safe to say that most people know, if not like, that our internet patterns and preferences are logged, stored and used to suggest items of interest, places we might like to go, things we might like to eat.
But how would you feel about