LONDON -- Ron Layard-Liesching is every money manager's nightmare.
By 2050, Mr. Liesching, who is director of research at Pareto Partners, London, predicts huge numbers of managers will be replaced by the personal computer. Only a small cadre who can truly provide added value will survive.
Mr. Liesching foresees a world in which Joe Q. Public's computer would know more about investments than any individual could hope to keep in his head.
And with the individual investor expected to call the shots in the future, computer-generated investing could become even more critical. Call it the Age of the Virtual Money Manager.
The PC not only will have real-time data on stock and bond markets around the world but also its user's financial profile. The computer will optimize the investor's asset mix and securities on a daily basis; all the investor will have to do is touch a button to execute the trades.
What's more, the computer will be able to pay bills, handle taxes and deal with other financial matters. Observers believe players such as Fidelity Investments and Citigroup Inc. already are heading down this road.
Mr. Liesching figures it will take about five years for the average desktop computer to become an "intelligent agent" -- capable of processing millions of pieces of information daily tailored to each individual user. He estimates such a computer would have to process 5 million instructions per second, compared with 1 MIPS today.
If an investor wanted to access the best investment wisdom available, he or she could pay, say, $2,000 a pop to receive the advice of a top portfolio manager, Mr. Liesching said. Trades stemming from those securities picks would be implemented electronically, without the need of an external manager or broker.
The upshot is that most intermediaries would become irrelevant.
In addition, demand for new forms of insurance to cover transactions with counter-parties, among other things, could spring up, he said.
Other money managers are not persuaded that intermediaries will be wiped out. They argue investors always will seek out the expertise and comfort of speaking to an individual.
"You're not going to stop going to a doctor because a computer can analyze a cold today," said Kathleen Corbet, chief executive officer of Alliance Capital Ltd., London.
Denis Bastin, European partner of William M. Mercer Ltd.'s Manager Advisory Services, London, added that information overload could cause an investor to "throw up his arms and go back to the investment adviser."
Earlier predictions of technology replacing humans have been wrong.
Dean LeBaron, the visionary founder of Boston-based Batterymarch Financial Management, said he has forecast for 15 to 20 years that there would be fewer investment professionals as support functions were taken over by technology. He also has predicted compensa- tion in the industry would go down.
Mr. LeBaron volunteers that he has been wrong on both counts, although he was right that machines would perform certain tasks better, faster and cheaper than people.
"But the conclusions I drew from this were wrong. The reason for my absolute failure," he said, is there has been a growing demand for "confidence-building tasks," such as taking advice from an expert.