It’s the year 2020. You take a pill at birth that remains permanently in your stomach, continuously measuring your health and intellectual acumen.
As part of your education and nurturing as a child, you must select between scarce resources: playing and learning. These selections feed into measurements of risk and reward, and instinct versus due diligence. The data will help us understand your tolerance for risk more accurately than we ever thought possible.
The path that you choose throughout your academic life and then into employment will produce detailed mind-maps of intellect, knowledge and potential for financial gain. By the age of seven, it is already possible to predict with 80 per cent certainty what income bracket someone will fall into – by 2020, the accuracy of this will have advanced considerably.
These measurements would be submitted to a financial regulator – not a person, but a series of super-computers. They process the data and determine the suitability of investments for you, with the power to warn you before you make sub-standard financial decisions.
This is fortunate because, even in 2020, humans tend to behave irrationally. They will want to buy houses at overblown prices for fear of being left off the ladder, they will sell their investments when markets drop due to anxiety, and they will blatantly ignore the core principles of saving for the long term.
By then, houses and stocks will be considered rather quaint when it comes to investing. Most people will invest in entities that are related directly to their local or personal preferences. For example, a stroll to the local bakery, where the coffee cups have small electronic chips that link to your watch (phones are so 2014), might result in you buying a share in that business. Surely no one could resist those home-baked croissants – it must be a winner!
But if you try and buy too much of the bakery, an intelligent investment console will stop you.
Strolling down the road with your coffee in hand, you are sent more interesting opportunities. There are two teenagers in Africa and Asia, hoping to raise investment for their tuition fees in exchange for 10 per cent of their lifetime earnings. They both seem super smart, so you head to your financial dashboard, which shows you your current investments, and you swipe a portion of your money over to them in a flash.
As part of this smart investing system comes an avatar – a virtual version of you, just really good with money. The smart banks realised that holding money was never going to turn a profit for them; now they make money from helping you make better decisions.
When you head to the checkout with a £100 jumper, the avatar will remind you that, by moving the money into an “old age” pot instead, it could be worth £3,000 when you retire. The avatar “earns” 0.1 per cent of everything it saves you.
2020 is only five years away but most of this technology either exists, or is in development, today. We’re experiencing such a rapid acceleration within the financial technology (fintech) industry that, over the next five years, I believe this vision will become reality.
This article was first published on Wednesday 3 December 2014 by City AM
Risk warning: As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past or future performance indicators are not a reliable indicator of future performance.