Automated financial advisor PortfolioPilot has garnered $20 billion in assets, demonstrating the potential disruption of artificial intelligence (AI) in the wealth management industry. Since its launch two years ago, PortfolioPilot has acquired over 22,000 users, with a median net worth of $450,000. The service utilizes generative AI models from OpenAI, Anthropic, and Meta’s Llama, as well as machine learning algorithms and traditional finance models for various purposes, such as portfolio evaluation and forecasting. Global Predictions, the startup behind PortfolioPilot, has raised $2 million in funding to support its growth.
The wealth management industry has long been concerned about the possibility of AI rendering human advisors obsolete. With generative AI’s ability to create human-like responses, this fear seems increasingly plausible. However, despite the rise of robo-advisors like Betterment and Wealthfront, advisory-led wealth management firms such as Morgan Stanley and Bank of America have continued to thrive. Morgan Stanley’s advisors currently manage $4.4 trillion in assets, significantly more than the $1.2 trillion managed in its self-directed channel.
One of the challenges faced by both human and robo-advisors is the tendency to provide clients with similar portfolios. This cookie-cutter approach has left many investors dissatisfied. Global Predictions aims to address this issue by offering personalized recommendations and opinionated insights. By allowing users to control their level of involvement, the startup believes that true next-generation advice is achieved.
PortfolioPilot evaluates portfolios based on three main factors: risk level matching the user’s tolerance, risk-adjusted returns, and resilience against sharp declines. Users can obtain a report card-style evaluation of their portfolios by connecting their investment accounts or manually inputting their stakes into the service. While the basic version is free, a $29 per month “Gold” account provides personalized investment recommendations and an AI assistant. Global Predictions targets individuals with assets ranging from $100,000 to $5 million, who are more concerned about diversification and portfolio management.
Although Global Predictions currently does not take custody of user funds, it provides detailed instructions to customers on how to optimize their portfolios. This approach lowers the barrier for users to engage with the software. However, the company envisions a future version that would allow it to have more control over client funds. This could involve building deeper integrations with financial institutions and potentially offering a robo-advisor system that executes trades on behalf of clients.
Alexander Harmsen, co-founder of Global Predictions, initially developed PortfolioPilot to manage his own wealth after selling his first company. He was dissatisfied with the standard approach offered by financial advisors and wanted hedge fund-quality tools and risk management strategies. Harmsen’s frustration led him to code a program that could handle his investments. Recognizing its broader potential, he assembled a team and founded Global Predictions, attracting former employees from Bridgewater Associates, the world’s largest hedge fund.
The rapid rise of Global Predictions and PortfolioPilot has not been without its challenges. The Securities and Exchange Commission (SEC) accused the company of making misleading claims in 2023, resulting in a $175,000 fine and a revision of its tagline. Despite this setback, Harmsen believes that many traditional providers will be left behind as the industry transitions to fully automated advice. He emphasizes the need for AI and economic models to generate advice automatically, suggesting that traditional human financial advisors may face a significant shake-up in the coming years.
