The Future Ain’t What It Used to Be*

Artificial intelligence (AI) will be a catalyst for profound change in society and business. The investment advisory world will not escape this technological wave. Indeed, AI has already landed on the shores of wealth management in the form of robo-advisors and algorithmic portfolio management (e.g., Blackrock’s suite of ETFs that use AI to manage portfolios).

Since the Industrial Revolution, new technologies have always been a source of trepidation, owing to the financial uncertainty it creates for individuals and communities.

Interestingly, advisors seem optimistic about the impact AI will have on them and their practices. In a recent survey, 56 percent of RIAs and fee-based advisors were positive about AI, with 66 percent actually believing that AI will provide a competitive advantage. Additionally, 46 percent believe that AI will increase accessibility and affordability of financial planning, while 39 percent think that AI will provide more accurate predictions about clients’ future needs and behavior.¹

AI, In Practice

There are a number of AI tools that have already found a place in the investment advisory space.

For instance, Socialmatters.ai uses algorithms to help advisors grow their LinkedIn networks, ranking contacts based on likelihood of response. Advisor feedback helps to refine search criteria to improve future results.

Some advisors are working with medical data collection businesses, such as Genivity, to create detailed health care cost projections that are specific to a client’s medical history.

Another area in which AI should help advisors become more effective is in identifying more substantive client contact opportunities at the start of each workday. Through the integration of portfolio data, news stories, client social media posts, client visits to specific areas of an advisor’s Web site, etc., AI can identify communications and needs highly specific to each client. With AI working tirelessly overnight, advisors can come in each morning with a list of relevant client communications to begin the day.

Hurdles to Clear

This brave, new future will encounter challenges. Perhaps the biggest obstacle to this vision is the legacy systems that now dominate most broker/dealer platforms. After decades of bolting one aging system onto another, many broker/dealers will be faced with a very costly decision—whether to build an entirely new platform from scratch to maximize the potential of AI capabilities. It may be an inevitable decision, but it likely won’t be made quickly.

The second big challenge is the competition for top coding talent. As it stands today, Silicon Valley is the dominant destination for the best computer programmers and engineers. Without the requisite talent, Wall Street will have a harder time reaching AI nirvana.

Nevertheless, the AI future for advisors beckons.

* Yes, totally stolen from the great Yogi Berra.

Source(s):

1. https://assets.nationwideadvisory.com/jeffnat2/cache/file/5FB48F32-BCDF-5731-514B56210333A890.pdf

 See referenced disclosure (2) at https://blog-dev.americanportfolios.com/disclosures/