Connected into a virtual 3D environment, an advisor walks her client through a dynamic visualization of a financial plan. They discuss potential life goals, explore career and family paths and plot out different strategies to achieve financial independence. The conversation shifts from job promotions to children to retirement. The simulated world around them switches between several interactive videos, each tied to different triggers in an underlying financial model.
The meeting goes well, and the client agrees to work with this advisor. Taking off the VR headset, the client places a thumbprint on the small panel on the side of the device. With a few spoken phrases of consent and the electronic signature of the thumbprint, software begins its journey to realize this financial future.
In 15 seconds, five different accounts are opened on three different custodians. Each account is funded and invested in hundreds of holdings, with no transaction cost. The smallest account is a mere $0.25, a symbolic investment for college of the client’s future daughter, not yet born. The $0.25 is split into 15 asset classes, each holding diversified ETFs as well as digital shares of alternatives. The journey has begun.
Technology That Works Together
The future described in the example above is surprisingly close. Several key technologies can shape this interaction, and their first iteration is already being used today. Let’s start with the mode of interaction – virtual reality.
Over the last four years, virtual reality (a world seen via a headset) and augmented reality (a world rendered on top of what we see) received billions of dollars of financing for research and development. An entire ecosystem of manufacturers and software providers, with firms like Facebook, Google and Microsoft, is racing to build interactions inside a virtual world. Today’s virtual experiences are still rudimentary, but the feeling of presence that they evoke is unlike that of any other technology.
An advisor and client have a valuable and special human relationship. Virtual reality will allow the advisor to literally take a client on a journey through a simulated financial model, made understandable and empathetic by triggered simulations. What would it be like to buy that house? Just ask and see!
The second part of the experience is the connection between account opening, electronic signature, custodians and immediate trading. Such a frictionless environment may be a decade away, but the infrastructure to make it happen is already being built. The key technology underlying this future is the digitization of currency, and thereafter, all asset classes.
As the largest digital currency, Bitcoin is the center of attention. Imagine a world where each unit of monetary value was infinitely divisible and transferred without any marginal cost. Imagine also that any holding, whether it is an ETF, a stock, or even a quantitative hedge fund interest, can be treated no different than a digital photo or mp3. Today, bank consortiums are working on exactly this project by leveraging the infrastructure underneath Bitcoin, called the Blockchain.
The Blockchain is a store of information, but unlike a traditional ledger, which derives authority from a single financial institution or government, its authority is distributed between all of its participants. It may be public, supporting the libertarian bend of Bitcoin’s founding, or private, reflecting the structure of a self-governing organization within the financial industry. But regardless of how it will be implemented, using the Blockchain as infrastructure for both legal contracts and trading will massively de-risk our economic system and drive to zero the marginal cost of doing business.