Conversational AI Can Help Investors Learn, Plan, and Execute More Confidently

In a Nutshell: Generative and conversational AI evolved from theory to buzzword seemingly in a flash. If you’ve used ChatGPT or another AI tool, you realize its tremendous potential for research efficiency. Interestingly, Magnifi has roots before the current focus on AI. Founded in 2018, subscription-based Magnifi combines a powerful conversational investing assistant and search engine with on-demand data, interactive planning tools, and a commission-free brokerage. Magnifi can get you to the next level as an investor by cutting through jargon, organizing information, and using data to prompt action.

How the culture of investing has changed is a prime example of the effect of digital transformation on financial services.

While not purely the domain of the elite, the markets had more than a tinge of exclusivity in the days before the internet. Investors leaned on each other for tutelage and kept public outreach to a minimum.

Online brokers emerged soon after the advent of the web. A few years later, cellphones and 5G ushered in investment apps with zero commissions and fractional-share trading.

Suddenly, everyone could invest. As Americans approach the second quarter of the 21st century, more than 25 million consumers have more than one self-directed brokerage account.

A question that comes to mind is what these millions are doing with their newfound access. Another is what does the new breed of AI tools from fast-rising firms hold for the future of investing.

Tom Van Horn, Chief Operating Officer at Magnifi, a conversational AI assistant for investors, answered both during our conversation in the summer of 2024.

Van Horn explained that fingertip access to the markets doesn’t create market experts. In a world of information overload where the web provides every possible answer to every possible question, investors at all stages lack a coherent view of the market and its many influences.

They struggle to put the puzzle pieces together in a way that credibly informs their goals. Magnifi allows investors to connect their accounts, define their values and objectives, and draw on real-time data. This allows them to use today’s most consequential AI tools to provide a conversational context for confident action.

Van Horn said Magnifi closes the gap between the rhetoric of investing and the level of meaning and insight necessary to take the next step — whatever that happens to be.

“As a conversational AI assistant, we sit between self-directed investors and the market to bring those puzzle pieces together,” Van Horn said. “We use natural language to help investors understand, analyze, and execute with confidence.”

Magnifi aligns with investors through its subscription model. It doesn’t earn through order flow, nor are there incentives to push a specific product or compel users to trade.

“We want them to get a better wealth outcome,” Van Horn said. “We aggregate their accounts together to unlock analysis and intelligence they may not have known to look for.”

It’s a bigger problem than ever because Americans tend to accumulate investment accounts — retirement accounts from a string of employers and accounts on multiple consumer investment platforms, for example.

“If you’re in that situation and want to know how much Nvidia you own, Magnifi can generate the answer in a second,” Van Horn said. “Without it, it’s a non-starter: You’re logging on to multiple platforms, downloading your holdings, researching a bunch of fund sites, and doing a bunch of math.”

Furthermore, index funds bury individual investments in the fine print to the point where claiming the ability to draw conclusions about trading strategies and tactics in light of macroeconomic trends and current events strikes many as overconfident at best.

Figuring out what to do when something happens in the market that may or may not relate to your investments can be a huge challenge.

If you’re the type to put life aside and follow the news consistently, you may have a fighting chance to draw the proper conclusion. But if you’re like the rest of us and have household responsibilities and interests beyond ETFs and mutual funds, you wish you had someone to tap your shoulder when necessary.

That’s Magnifi. You’ll learn what it means to you personally if energy prices rise, instability in some part of the world impacts the supply chain, or inflation drives the Federal Reserve to increase the interest rates.

“You no longer have to ponder what the news means,” Van Horn said. “You can ask routine questions in plain English, and we’ll apply investment science to deliver value back to you.”

Users come to Magnifi from all walks of life, but they all share the desire to leverage their investment time to produce tangible results. Investment apps may make investing seem gamelike, but putting in the time to create a secure retirement or lasting household wealth is serious business.

Magnifi asks all new users whether they’ve ever invested. The app then takes them on a unique journey based on their answers to questions designed to get to their “why.”

Sophisticated usage algorithms work as a real-time insights engine to help users with follow-up questions others found valuable. Magnifi saves users time and speeds up comprehension.

“You wake up in the morning, and Magnifi will say, hey, there was a significant move in your accounts yesterday — let me tell you how it impacted you and why,” Van Horn said. “Users don’t know to ask those questions, but our AI assistant is always monitoring your investments against those things and notifying you about them.”

It’s way more than what a standalone AI tool can achieve because Magnifi draws on real-time investment data when you securely connect your personal investment accounts.

Magnifi subscribes to feeds from popular data aggregators such as Morningstar and FactSet to give the AI tools the comprehensive information they need.

It also operates an internal brokerage with actionable features, including real-time pricing feeds, available when users want to take advantage of them.

The neural networks delve into those datasets to answer “compliance-tagged” questions about personal impact, tapping into financial planning, comparative quant, and impact scenario analysis.

“Those interactions never go out to those popular neural network models that people are all familiar with — they stay within Magnifi’s walls in a compliant fashion,” Van Horn said. “We bring those models in-house and fine-tune them to serve our customers’ needs.”

In today’s market, generic AI tools are ready to sit down with you and answer all your questions, regardless of whether the responses are helpful.

Magnifi has a patent on an “ontology” (a structure that applies meaning to language in a financial context) to make those conversations productive in light of the user’s unique situation.

The company, founded in 2018, built much of that functionality well before ChatGPT was the buzzword it is today.

“We have hundreds of millions of examples of users searching for financial products and asking questions,” Van Horn said. “Now we’ve brought those AI tools in-house, selected which ones perform the best in what scenarios, and applied our real-world data to them.”

The result is not an app for day traders looking for a quick hit here and there. It’s also not for the set-it-and-forget-it crowd.

Instead, Magnifi is for investors coming to the market with just enough experience to know they don’t know it all. Common sense says that number includes most traders, potentially millions beyond those with more than one self-directed brokerage account.

Magnifi is for you if you want to become a more confident, productive investor and have the wisdom to appreciate the advantages of Magnifi’s unique combination of AI and market awareness.

It’s all about the platform getting to know you better. Getting people to better wealth outcomes may mean putting them on a course for lower performance if they’re risk-averse and abhor volatility.

Uptake indicates the company is doing something right. Users have connected more than $2.2 billion in assets in about a year. Investors need AI to select and research the nuts-and-bolts data to make sense of our increasingly complex financial world.

As more consumers download the apps and enter the investment marketplace, Magnifi guides them with education, analytics, and comparisons they otherwise would have to chase down from different places.

“That’s what’s most exciting for me,” Van Horn said. “Investing is complicated, but Magnifi lets you have a central point in your investing life to get answers to all your questions.”