How Will AI Impact the Finance Industry?

by Benjamin Beck, CFP® Benjamin Beck, CFP® | October 23, 2023

Everyone is talking about artificial intelligence (AI) these days. Whether it be in the news, on social media, or in conversations with friends, the topic of AI has become inescapable.

We’ve received several inquiries from clients asking how we think AI will impact the investing world, and also about investing in AI. (In case you missed it, we recently dedicated a segment of our NoBondsCast episode to this topic.) 

So, let’s discuss AI and how significant technological developments in the past shifted the world as we know it.


The Impact of Technology Is Constant

A few decades ago, we were astounded by the advances of the cellphone. 

If you’re of a certain age and worked in the corporate world, you’ll remember the Blackberry. Further back, you may remember going to a computer lab in college to send and receive emails. And look at us today! The average cell phone in your pocket likely has more computing power than all those early devices put together.

The internet was an incredible invention, the impact of which was hard to imagine at the time. Today, you wouldn’t think twice about the fact that it’s intertwined into every aspect of our lives. 

Let’s say I’m at the airport: My flight lands and I take out my phone and open an app that already has my home address programmed in it. With the touch of a button, a car magically appears and brings me to my house. 

Of course, there’s a name for all that technological magic: It’s called a smartphone, paired with a ride-hailing app, powered by the internet. It feels like second nature, but 20 years ago there was no Uber or Lyft, or even the kinds of apps that we depend on for just about everything today, like getting our groceries or checking our bank balances.

The rate of change in technology never ceases to amaze me. It's one of those things that when we are busy living our lives — as we typically are — we don’t even notice. It feels like this technology just floats in and we don’t necessarily see a huge change right away, but then suddenly, our world is different. 


Should We Invest In AI?

How much has the world changed in 20 years? I submit it's changed substantially. 

What happens when you bring machine learning and artificial intelligence closer to thinking, acting, and executing either like human beings or, in some cases, even more efficiently than human beings? What kind of impact does that have?

We can look at the impact in many ways. For today’s conversation, though, let’s just consider the impact AI may have on an individual company. 

When innovation drives efficiency, it impacts the cost-effectiveness of the company. I’ll share an example: I was recently speaking with one of my clients who works in the artificial intelligence consulting space. He's currently working with a large municipality that has an issue with its infrastructure being dilapidated, so it needs an upgrade. He shared with me how artificial intelligence can provide an increased level of accuracy and efficiency for a project like this.

For example, say you work for a city and you have an old bridge and concrete steel that inevitably develops cracks over time. How do you know when it's time to fix the bridge? Traditionally, you would have a team of engineers go out and drill and look for cracks and bring back their findings. It could take many months to evaluate what it would take to repair a bridge like that. With the technology available today, it’s possible to fly smart drones underneath the bridge and pinpoint all the areas of weakness in a matter of minutes and have the technology calculate exactly what it would take to fix it. The technology improves the accuracy of the evaluation, increases the efficiency of the repair process, speeds up the entire process considerably, and saves the city a lot of money.


AI Drives Innovation and Innovation Drives Growth

So even if AI may feel like a sci-fi thing that’s a little unnerving, from an investment standpoint, when technologies like AI are driving innovation and performance, they affect the rate of change in business, which affects the bottom line. It makes for stronger companies in a lot of ways. And stronger companies eventually translate to stronger investment holdings — stronger investment choices that really impact our clients' long-term, real-life returns.

Ultimately, the world is still learning what AI has to offer and the impact it will have. 

Just looking at what changes have taken place over the last 20 years as a result of the internet gives me a lot to be excited about what AI can do for companies over the next five years, 10 years, and beyond. I’m ready for it and hope you are, too.

Ben Beck, CFP® is Managing Partner & Chief Investment Officer at Beck Bode, a deliberately different wealth management firm with a unique view on investing, business, and life.


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