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AI-powered financial advisor has $20 billion in assets

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AI-generated responses are becoming more common, whether travelers know or not.

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An automated financial advisor called PortfolioPilot has quickly gained $20 billion in assets in a possible preview of how disruptive artificial intelligence could be for the wealth management industry.

The service has added more than 22,000 users since its launch two years ago, according to Alexander Harmsen, co-founder of Global Predictions, which launched the product.

The San Francisco-based startup raised $2 million this month from investors including Morado Ventures and the NEA Angel Fund to fund its growth, CNBC has learned.

The world’s largest wealth management firms have rushed to implement generative AI after the arrival of OpenAI’s ChatGPT, rolling out services that augment human financial advisors with meeting assistants and chatbots. But the wealth management industry has long feared a future where human advisors are no longer necessary, and that possibility seems closer with generative AI, which uses large language models to create human-sounding responses to questions.

Still, the advisor-led wealth management space, with giants including Morgan Stanley and Bank of America, has grown over the past decade even amid the advent of robo-advisors like Betterment and Wealthfront. At Morgan Stanley, for instance, advisors manage $4.4 trillion in assets, far more than the $1.2 trillion managed in its self-directed channel.

Many providers, whether human or robo-advisor, end up putting clients into similar portfolios, said Harmsen, 32, who previously cofounded an autonomous drone software company called Iris Automation.

“People are fed up with cookie-cutter portfolios,” Harmsen told CNBC. “They really want opinionated insights; they want personalized recommendations. If we think about next-generation advice, I think it’s truly personalized, and you get to control how involved you are.”

AI-generated report cards

The startup uses generative AI models from OpenAI, Anthropic and Meta’s Llama, meshing it with machine learning algorithms and traditional finance models for more than a dozen purposes throughout the product, including for forecasting and assessing user portfolios, Harmsen said.

When it comes to evaluating portfolios, Global Predictions focuses on three main factors: whether investment risk levels match the user’s tolerance; risk-adjusted returns; and resilience against sharp declines, he said.

Users can get a report card-style grade of their portfolio by connecting their investment accounts or manually inputting their stakes into the service, which is free; a $29 per month “Gold” account adds personalized investment recommendations and an AI assistant.

“We will give you very specific financial advice, we will tell you to buy this stock, or ‘Here’s a mutual fund that you’re paying too much in fees for, replace it with this,'” Harmsen said.

“It could be simple stuff like that, or it could be much more complicated advice, like, ‘You’re overexposed to changing inflation conditions, maybe you should consider adding some commodities exposure,'” he added.

Global Predictions targets people with between $100,000 and $5 million in assets — in other words, people with enough money to begin worrying about diversification and portfolio management, Harmsen said.

The median PortfolioPilot user has a $450,000 net worth, he said.  

The startup doesn’t yet take custody of user funds; instead it gives paying customers detailed directions on how to best tailor their portfolios. While that has lowered the hurdle for users to get involved with the software, a future version could give the company more control over client money, Harmsen said.

“It’s likely that over the next year or two, we will build more and more automation and deeper integrations into these institutions, and maybe even a Gen 2 robo-advisor system that allows you to custody funds with us, and we’ll just execute the trades for you.”

‘Massive shake up’

PortfolioPilot uses ChatGPT to develop personalised investment portfolios

The company’s rise has attracted regulatory scrutiny; in March, the Securities and Exchange Commission accused Global Predictions of making misleading claims in 2023 on its website, including that it was the “first regulated AI financial advisor.” Global Predictions paid a $175,000 fine and changed its tagline as a result.

While today’s dominant providers have been rushing to implement AI, many will be left behind by the transition to fully automated advice, Harmsen predicted.

“The real key is you need to find a way to use AI and economic models and portfolio management models to generate advice automatically,” he said.

“I think that is such a huge jump for the traditional industry; it’s not incremental, it’s very black or white,” he said. “I don’t know what’s going to happen over the next 10 years, but I suspect there will be a massive shake up for traditional human financial advisors.”

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These are 3 big things we’re watching in the stock market this week

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A security guard works outside the New York Stock Exchange (NYSE) before the Federal Reserve announcement in New York City, U.S., September 18, 2024. 

Andrew Kelly | Reuters

The stock market bounce last week showed once again just how dependent Wall Street has become on the whims of the White House.

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These U.S. consumer stocks face higher China risks

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Apple iPhone assembly in India won’t cushion China tariffs: Moffett

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Street's biggest Apple bear says a production move to India is unrealistic

Leading analyst Craig Moffett suggests any plans to move U.S. iPhone assembly to India is unrealistic.

Moffett, ranked as a top analyst multiple times by Institutional Investor, sent a memo to clients on Friday after the Financial Times reported Apple was aiming to shift production toward India from China by the end of next year.

He’s questioning how a move could bring down costs tied to tariffs because the iPhone components would still be made in China.

“You have a tremendous menu of problems created by tariffs, and moving to India doesn’t solve all the problems. Now granted, it helps to some degree,” the MoffettNathanson partner and senior managing director told CNBC’s “Fast Money” on Friday. “I would question how that’s going to work.”

Moffett contends it’s not so easy to diversify to India — telling clients Apple’s supply chain would still be anchored in China and would likely face resistance.

“The bottom line is a global trade war is a two-front battle, impacting costs and sales. Moving assembly to India might (and we emphasize might) help with the former. The latter may ultimately be the bigger issue,” he wrote to clients.

Moffett cut his Apple price target on Monday to $141 from $184 a share. It implies a 33% drop from Friday’s close. The price target is also the Street low, according to FactSet.

“I don’t think of myself as the biggest Apple bear,” he said. “I think quite highly of Apple. My concern about Apple has been the valuation more than the company.”

Moffett has had a “sell” rating on Apple since Jan. 7. Since then, the company’s shares are down about 14%.

“None of this is because Apple is a bad company. They still have a great balance sheet [and] a great consumer franchise,” he said. “It’s just the reality of there are no good answers when you are a product company, and your products are going to be significantly tariffed, and you’re heading into a market that is likely to have at least some deceleration in consumer demand because of the macro economy.”

Moffett notes Apple also isn’t getting help from its carriers to cushion the blow of tariffs.

“You also have the demand destruction that’s created by potentially higher prices. Remember, you had AT&T, Verizon and T. Mobile all this week come out and say we’re not going to underwrite the additional cost of tariff [on] handsets,” he added. “The consumer is going to have to pay for that. So, you’re going to have some demand destruction that’s going to show up in even longer holding periods and slower upgrade rates — all of which probably trims estimates next year’s consensus.”

According to Moffett, the backlash against Apple in China over U.S. tariffs will also hurt iPhone sales.

“It’s a very real problem,” Moffett said. “Volumes are really going to the Huaweis and the Vivos and the local competitors in China rather than to Apple.”

Apple stock is coming off a winning week — up more than 6%. It comes ahead of the iPhone maker’s quarterly earnings report due next Thursday after the market close.

To get more personalized investment strategies, join us for our next “Fast Money” Live event on Thursday, June 5, at the Nasdaq in Times Square.

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