Future of Financial Services

I am at a conference in Denver this week with the focus on the future of the financial services industry, economy, and investors. It has been very cold this week and as I write this it is 16 degrees outside. The event is at the Broadmoor Resort that has earned a five-star rating for the longest consecutive period of any resort in the US.

The first series of speakers focused on the state of the financial industry and consumers. Mark Hurley's speech was titled "Welcome to the Jungle: Navigating the Future of Wealth Management." The summary of his speech is that if you think it is difficult for you to reach a real person at a national financial organization (e.g., bank, insurance, medical, etc.), it may be even more challenging soon. Major companies are embracing new AI technology to replace staff to reduce expenses and "improve efficiency." Beware, the pleasant conversation with customer service is really an AI-generated voice.

The opportunity for smaller financial and investment companies is to do the opposite. Become more personable and available by adding staff and improve personnel availability from senior management to support staff.

Jean Twenge had an insightful presentation titled "The Real Differences Between Generations – And What They Mean for America's Future." She was most concerned about Gen Z (born 2000 – present), called the "New Silent Generation." This generation has experienced several 100-year events before turning 30 years old. As young children, their parents suffered through the dot.com crash in 2000- 2003. Then, as Gen Z graduates from high school and college, they entered the job market during the 2008 worst housing market, which had shattered in several decades. As if that was not enough for one lifetime, the 100-year worldwide viral infection resulted in government mandates that isolated everyone in their homes, and many of their young kids are experiencing learning disabilities from two years of remote "learning."

Possibly the most devasting experience for Gen Z is the explosive growth of smartphones. By 2012, nearly 90% of phone usage was on smartphones, which has transformed how Gen Z communicates with their peers. Ms. Twenge showed several slides of public areas such as restaurants and malls in which nearly everyone was looking down at their phone and not at the person next to them.

She attributes screen time on phones, iPads, and computers by Gen Z and their children as one of the most destructive activities to personal and emotional development. In the slides below, she illustrated a declining trend of in-person socializing since 2000 with the rise of smartphones.

Most alarming was the next slide illustrating a dramatic rise in major depressive episodes that began in 2012. She noted the decline in personal emotional stability directly correlates with the rise of smartphone usage. Note the parallel rise of both Gen Z and their children.

During another session several CEO's of advisory firms said they were struggling to get Gen Z to call people or more fearful was scheduling in person meeting. Gen Z is very comfortable with video conferencing, emails, and texting but very hesitant to meet in person.

Gen Y (born 1980 – 2000) and Gen X (born 1965 – 1979) seem to be acclimating better with technology while maintaining personal relationships and "old school" communications.

Meanwhile, large corporations, as mentioned above, are embracing technology to corral customers into phone trees to potentially meet the customer's needs without involving staff. During one session the topic focused on future use of AI. Just like the screen actor and graphic designer industries are projecting 16,000 in job losses due to AI technology, AI may also replace portfolio managers, research analysts, and even the traders themselves.

Also, don't believe that all you read was written by people even formerly depended on white papers from universities and PhDs that may have been written by ChatGPT. CBS reported on February 5 that a release by 4chan users of a DeepFake AI video of Taylor Swift looked so real that Taylor herself had to announce the video was a fake.

Dave Barton, Vice Chairman of Mercer Advisors, with over $40 Billion in assets, stated that AI programs now have an IQ of 115, and within five years, AI programs will have an IQ exceeding 180, which is higher than genius. Dave said that not only do face recognition AI computers instantly recognize one's feelings but even empathize and experience similar emotions.

What Does This Mean to Me?

Overall, the census among attendees I spoke with and speakers had moderately bullish forecasts on the US economy and stock market. The core strength of the economy is directly related to the strength of the consumer. As it pertains to AI, most speakers do not believe regulators will be able to move as fast as the industry. Our commitment to you and our clients is you will always be able to reach us and be available to meet with you in person. Also, unlike one of my grandsons who had ChatGPT write his book report, we will always do our own research and author this Weekly Brief. That is, of course, until some AI robot carries us away.

Let us know your thoughts on this Weekly Brief. We welcome the opportunity to meet with you to discuss your financial goals and strategies we may be able to assist.