Practical Applications of Lifecycle Goal Achievement or Portfolio Volatility Reduction?

Abstract

Advances in artificial intelligence mean robo-advisors are more sophisticated than ever. But can these automated systems beat human investment advice? Michael Dempster Managing Director of Cambridge Systems Associates, and his team launched one of the earliest robo-advisors: The iALM (Individual Asset Liability Management) system. “Since the early 1990s, we have done a lot of work with institutional investors to apply stochastic—or scenario-based—optimization techniques, and the idea was to use our models to bring this to the individual investor,” says Dempster. Lifecycle Goal Achievement or Portfolio Volatility Reduction?, compares the results of the iALM’s dynamic strategy with the financial advisory industry’s current best practices and finds that the automated system can provide better outcomes than some of its human counterparts.