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Judgment Day: Nearly 8 in 10 Consumers Would Leave SkyNet in Charge of Their Investments

The hand of a robot clicking keys on a laptop with a stock chart on the screen.

In 1991, director James Cameron brought Terminator 2: Judgment Day to theaters, and it quickly became one of the most iconic classics of the decade. The premise of the movie, and of the trilogy of Terminator movies for that matter, is that everyday machines had become self-aware. With humans turning over more and more control of day-to-day activities to machines, they become vulnerable to attack by SkyNet, the artificial intelligence that eventually does turn on them and attacks.

Thankfully, humans are still very much in charge today. But, if consumers had their way, machines would be doing a lot more in their day-to-day lives...including investing.

The hand of a robot clicking keys on a laptop with a stock chart on the screen.

Image source: Getty Images.

Rise of the machines

According to a newly published survey from Accenture of nearly 33,000 consumers in 18 countries and regions, a vast majority would consent to the use of robo-advice when it comes to a number of financial decisions. Here's how the results panned out:

  • 71% would be willing to receive robo-advice on which type of bank account to open.
  • 74% would be willing to receive robo-advice concerning which type of insurance coverage to purchase.
  • 68% would accept robo-advice for retirement planning.
  • 78% would be willing to accept robo-advice concerning what investments to make.

That's right, folks, nearly eight in 10 consumers would be willing to leave "SkyNet" in charge of their investment portfolios.

There are plenty of perceived benefits from entrusting your investment portfolio to a machine. Obviously, it would remove the element of emotion from the equation, thus eliminating any chance you'd have of making a rash investment decision to buy or sell an asset based on how you felt.

Additionally, robo-advisors would potentially help compensate for the lack of investing experience that new investors bring to the table. For example, the U.S. stock market has thousands of publicly traded companies to choose from, as well as complex asset structures (e.g., exchange-traded notes (ETN) or leveraged electronic-traded funds (ETFs)), which can make choosing an investment somewhat overwhelming for a new investor. Allowing a proverbial SkyNet to handle your investing strategy would remove the hassle of having little or no investing experience.

Couple meeting with their financial adviser.

Image source: Getty Images.

Another problem with entrusting your money to algorithms is they overlook major life events that might alter your investment outlook. For instance, buying a home, starting a family, or having a large and unexpected medical bill are all things that can affect your saving and investing trajectory. If you were managing your own money, or you were dealing with a financial professional, it would be easy to manipulate your investing strategy to account for what could be new goals. Machines don't account for these life events.

However, the biggest issue with trusting a proverbial SkyNet is that it could kill your chance of allowing compounding do its work. Machines are based on algorithms, and those algorithms often mean lots, and lots , of trades. Algorithms are often looking to profit from fractional moves in a stock, perhaps dozens, hundreds, or thousands of times a day. Can you imagine the commission costs and short-term capital gains such as a strategy could entail (assuming you were lucky enough to turn a profit)?

The data shows, though, that holding high-quality stocks and other assets over the long term and not trading as often offers you the best chance to build your nest egg. For instance, hanging onto high-quality dividend stocks and reinvesting those dividends back into more shares of dividend-paying stock is a strategy that some of the smartest money managers use to build wealth for their clients.

In the words of Arnold Schwarzenegger, I'd suggest saying "hasta la vista" to the idea of allowing a robo-advisor to invest your money.

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Sean Williams has no position in any stocks mentioned. The Motley Fool recommends Accenture. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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