In an era defined by rapid technological advancements, the wealth management industry finds itself at the nexus of innovation.
With the advent of Artificial Intelligence (AI), the traditional role of financial advisors is undergoing a profound transformation. But AI is not just a buzzword; it's a powerful tool reshaping how advisors manage portfolios, analyze market trends, and engage with clients.
In a recent Action! article, we delved into how AI is a game-changer for financial advisors. That article featured fintech consultant Grant Easterbrook. I wanted to catch up with Grant to chat more about the dynamic intersection of AI and financial advisory services.
We had a great conversation about how leveraging AI capabilities can empower advisors. Click on the video below for our entire conversation.
Transcript:
Suleman Din: Thank you, Grant, for joining us today. I really appreciate you taking the time and sharing your insight as an expert, especially in this evolution in the AI space, particularly as it relates to wealth management. You specifically spoke about chatbots and AI being used in that front-facing capacity. For anybody who picks up this magazine and reads this and says, wow, what's the importance of understanding how AI could potentially be deployed in wealth management?
Grant Easterbrook: There are a couple of different ways you can take that question. The basic level is if the average client had a very advanced AI in their Apple website, what would that do? Right? I think it's worth clarifying as an answer to that question what the average chatbot is today versus what it'll be in a few years' time. Right now, the average little customer service chatbot that you interact with is not using generative AI. And generative AI is that service you've heard about – ChatGBT, Bard – all this noise about generative AI, the industry isn't using that yet. It will someday. A lot of firms have made announcements about their investments in that and going towards that. But the average chatbot today could really only do very basic servicing, what's my routing number, where do I find this page kind of requests.
When you look at your website today, you're not going to see something that's going to really blow your mind. But everyone knows the next solution is coming. And generative AI can really act much more like an assistant. It's hard to pick an exact date or time. But in talking to some of our clients – and what I'm hearing – it seems like probably the first big firm rollout of generative AI assistant, maybe late 2024 or 2025. It will take a while to do this, but at some point, you will have actually a powerful assistant in your pocket.
When you have a powerful system that can explain financial concepts – help you understand different terms, help you with budgeting and financial planning and maybe maybe even give you advice and recommendations – that changes the way wealth management works. Where really that assistant is sort of the first line of defense to handle most common and basic things. And you meet with an advisor on a less frequent basis to really help you with the more complex stuff or through the emotional side of money. That's obviously an oversimplification, but at some point, that's what it'll probably look like in the future.
Din: So we're looking at a downshifting of roles or responsibilities in terms of client interactions even beyond simply just like checking for an account or looking at balances, but to start getting into more comprehensive questions still not that level of empathy to actually handle the client in crisis or whatnot. But for daily questions and even more, will this be the tool that an advisor can use to potentially serve more clients, smaller clients and even handle some of their regular clients just in a more targeted capacity?
Easterbrook: I think about it sort of like this – would you have a chatbot assistant generate your estate plan? Or would you have it set up your life insurance policy? Probably not. Those kinds of things are very important systems in your life that have the potential to lose you a lot of money if you do them wrong, right? But all this kind of routine stuff – what is life insurance, what different types of insurance, I just got a bonus at work should I put it into 401(k) or a brokerage account – sort of initial discussions level that the agenda of AI systems are pretty much already there in terms of able to have that level of discussion with you. They can explain financial concepts and help you with planning in terms of what's the average rent in New York City, what the average cost of a home in Miami, they can do all that initial conversation with you.
But the actual executing on your goal – setting up accounts or where the market is tanking and people are panicking – they are going to still need a human financial advisor, right? So to me, it just changes that an advisor may end up serving more people but having to spend less time on each customer because that assistant will be in your hand. This is not a short-term thing, this will take a long time before this plays out. It'll be a while, maybe 2024 late, probably 2025 before you even start to see these big firms have a generative AI assistant. But it's coming in the long term, that's probably how I'll shake out is my best guess.
Din: So anyone who reads this article and sort of gets an inclination to understand or wants to do more, what's one practical piece of advice that you could offer them to help them better understand the technology or even how to utilize it?
Easterbrook: You're talking about an advisor there, right?
Din: Yes.
Easterbrook: I think the simplest thing is to start with, try poking around ChatGBT3 or ChatGBT4 or Bard yourself, just try it out. I think there's so much hype and fear and claims – just play with yourself, and you'll see how it works. It's not really able to replace you. It's not going to be able to execute an estate plan, but it can explain concepts really well and answer questions about different budgeting topics, financial planning, considerations to keep in mind, etc. So just play with it.
In particular, you can even test to see how it handles advice and recommendation questions. So a lot of sensitivity around that, obviously. What you'll see when you play with these tools is generally if you ask a question, looking for advice without much detail – I just got a 50k bonus at work, I'm just making up an example here, should I put it into my retirement or the mortgage – it will respond by just giving you some bulleted things to consider. It's only to give it enough detail, I’m this age, I make this much money, I have this much debt, I have this much of the mortgage would actually give you a “I think you should do this or that” response. Even then it's very couched “I think…it sounds like…you probably could.” A long story short, just play with these tools for yourself to really understand what they actually do. That'll help sort of put your mind at ease quite a bit.
From there, it depends on whether you're more of an independent RIA or under a bigger shop where you don't have as much autonomy. If you're one of those firms that have some optionality around vendors, you can start looking into that as well. I would imagine for most advisors, AI assistant policies are going to be set at the company or home office level – it depends on what kind of advisor you are.
Din: Then there's this whole issue of how compliance is going to fit into all of this and oversight, that's all before the FCC right now.
Easterbrook: There are two things that I think get mixed up there – there's one of how the shop will handle questions where proprietary products are in play, you know, what should I invest in? Should I sell this or that? That is a very tricky question. There's already tons of rules and complexity around your own product lineup and there's just getting general advice or feedback, right? What should I do? If I spend too much money on rent, or am I paying too much mortgage? That, I think is less complex. People think they can already do that pretty well. If you try these tools yourself, you'll see that couches the language. It's almost always not going to say, I 100% recommend you do this. It's saying, here's what you consider, here's why it might be a good idea, you should possibly, you might. I think there's a lot of uncertainty around how to handle investments or proprietary products, but I hope that at least the regulation will shake out to be pretty straightforward for just general feedback and general guidance if that makes sense.
