AI and machine learning are already around us – it’s estimated such software is distributed in nearly 80% of devices we use today.
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But the emergence of Generative AI has captured the imagination of the public and industries, including wealth management.
“All it's done in my mind is really open up the eyes of folks to things that people in the industry like myself have known for a number of years – the potential for AI is absolutely enormous,” says Joel Bruckenstein, publisher of Technology Tools for Today (T3). “Layering AI with natural language processing is going to change the way that pretty much every industry operates.”
That being said, Joel isn’t worried about AI taking over financial advice.
“It's going to free advisors and their staff from repetitive tasks that have little or no value and free up more time to focus on valuable work. The addressable market for advice is gigantic in this country; only a tiny fraction of the public is availing themselves of professional advice today. Advisors are going to be able to serve more people.”
Bruckenstein offered some tips on how independent advisors should be thinking about how to adapt to the next wave of intelligent technology in the industry.
Take advantage of it when working with clients
“AI and machine learning are being applied to help with advanced financial planning. And almost every CRM company is using AI and machine learning to arrive at what they call the ‘Next Best Action’ when engaging with a client. Once you're engaging with the client, you’ll know what is the next best step to take with that client instead of trying to figure it out on your own. Or for example, a new law passes affecting investments. AI can go through your client base and tell you these are the top 10 clients you should be talking to first because the law will have a big impact on them.”
Automate certain tasks and roles…
“AI will play more of a role in so-called ‘low-level’ advice. If a client has a lot of questions that are simple – say they call up because they don't know what's the maximum allowable contribution to an IRA this year – you probably don't need a person for that. You can answer that question with a chatbot or a virtual assistant. This is going to be commonplace within five years in our industry. The simple rote stuff will get automated and only get pushed to an advisor if there's something that an advisor needs to review.”
…But add your character to everything
“The unique intellectual property of a firm will become increasingly important. Every firm has it today, but it's not organized digitally in a way that AI can easily access. It soon will be, and you'll put your unique twist on everything you deliver automatically. Initially, you will need a human to review before a letter or notification goes out to clients. However, as time goes on, it'll become more automated because the machines will continue to learn.”
Where should advisors shift their focus?
“In a nutshell: more high-end planning and a lot of coaching – a lot of this is behavioral; that won't go away. Look at what's happened in the accounting industry. It's not so much about needing an accountant – if you have a simple case, a machine can do that with you. But strategic planning, higher-end planning, multi-year tax planning, that’s where advisors add real value.”
Broaden the scope of your offerings
“Look at how many firms for years were just focusing on investments. Now they're doing at least some retirement planning and some financial planning. That's going to expand into more sophisticated planning. A very small segment of the advisory population today spends time helping clients, for example, managing the liability side of their balance sheet or on P&C insurance. Sophisticated firms are already expanding the scope of their services and getting paid for it.”
