“Alexa … will I meet my retirement goal?”
“You are not on track to meet your retirement goal,” replies Amazon.com Inc.’s voice-activated digital assistant, with not a bit of sugar-coating. Then she suggests turning over $76 a month to Fidelity Investments and its advisors.
This won’t actually happen if you try it on your Amazon Alexa device at home. It’s a demonstration put on by EMoney Advisor LLC, a company owned by Fidelity, in its offices in Radnor, Pennsylvania. Amazon provides software for third-party developers to experiment with new functions. Fidelity is trying to find ways to apply artificial intelligence, computer algorithms, and voice-recognition software to the hidebound world of money management and investing.
There’s some urgency to the task. These days, investing firms figure they’ll either master the digital world or become yet another of Silicon Valley’s victims. Each year, Fidelity gathers scores of technologists and executives to confront threats to the 71-year-old business, which manages $2.4 trillion and is one of the world’s biggest mutual fund companies and retirement plan administrators. Like generals and soldiers in a war game, they sketch out what they would do in all kinds of scenarios, such as a market crash or a merger that created a super rival. Just as ominous, perhaps, they ask: What if Amazon distributed financial products or offered its own financial advice? What if Google bought its own money manager?
Those tech companies could then do to the investment industry what they’ve done to businesses from publishing to electronics, squeezing already-shrinking profit margins and driving out established players. Even now, the soaring popularity of market-tracking index funds is pushing investment management fees ever closer to nil. “We’re working to innovate so we don’t get caught flat-footed,” says Bill Doyle, head of research for Fidelity Labs, which oversees the company’s experiments in financial technology.
For now there’s one big thing keeping the tech predators at bay: Getting into finance would pull Amazon and its ilk into closely regulated businesses in the U.S. But Fidelity and others see no guarantees this will deter tech companies forever. And beyond U.S. borders, where many financial companies look for growth, tech is already breaking through. In 2013, Chinese e-commerce giant Alibaba Group Holding Ltd. started selling a money-market fund. It is now the world’s largest, with 1.56 trillion renminbi ($235.6 billion).
Customers in the U.S., too, are ready to trust tech companies with their savings. More than half of investors with assets of at least $1 million would consider using one of the top tech companies to manage their wealth, according to a survey by consulting firm Capgemini SE. Three-quarters of millennials would take a flyer on an offering from Google, Amazon, Apple, or payments companies PayPal and Square over one from their own banks, according to a study by media company Viacom Inc. “If Google comes out tomorrow and asks if I want to invest, I probably would,” says Marcus Storr, who heads hedge fund investing at Germany-based Feri Family Trust. The search engine giant, a unit of Alphabet Inc., has data on billions of its users and millions of dollars to splurge on the best coders from around the world, who could automate the search for lucrative trades.