Across industries, artificial intelligence has become more than just a
buzzword. Its premise - that machines can be programed to think like
humans, to continuously learn, and to use that knowledge to solve increasingly
complex problems - has already been proven and the technology is well on its
way to mainstream adoption.
While many companies have been slow to adopt the technology, due in part
to steep implementation costs, AI and deep learning are rapidly growing prevalent in the
financial service industry. Financial advisors and RIAs, who have already been
The Rise of the
With more than $200 billion currently
under management, various industry studies predict that the amount managed
by robo-advisors will continue to grow at a torrid pace. At one
point, many even predicted that robo services would drastically
reduce or eliminate the need for traditional advisors.
Clearly, the demise of the human financial advisor has been greatly
overstated. While robo-advice has disrupted the advice industry, it has by
no means replaced humans. In fact, the technology has generally served to
enhance the delivery of advice. Take, for example, Vanguard’s offering, Vanguard Personal Advisor Services.
Vanguard's platform is a combination of robo technology and human advice
and has been widely successful in terms of drawing assets. And robo-investing
pioneer Betterment now offers options where clients can interact with a
human advisor as well as a platform that allows human advisors to use
Betterment's platform for their own clients.
Looking to the
There is much speculation about what the next frontier of AI will
be in the financial advisory industry. Many believe that the next
step is for AI to better facilitate advisors' relationship management. As an
example, an advisor could use AI during a client meeting to call up specific
client information and model the performance of potential recommendations, a
task that previously would have taken a team of analysts several hours or more.
While many of today’s financial planning programs do offer
these capabilities, AI's growth will only serve to expand
software's analytical and predictive power. This is augmented by AI's deep
learning capabilities, which will relieve advisors from having to perform much
of the rote or mundane monitoring and administrative tasks that currently
occupy a significant portion of their time. For example, an AI-based system
could be set-up to monitor client portfolios and send a signal to the advisor
when allocations fall outside of certain parameters.
While AI could conceivably eliminate some roles for human advisors or
support personnel, AI's analytical capabilities will likely result in the
growth of more specialized, interpretive roles as well. The adoption of
Artificial Intelligence will free up advisor time for increased
client-facing activities: it's unlikely that advisors will ever want to just
let their systems spit out data and analysis directly to a client without some
review of this output.
It's likely that many of your clients' inquiries are questions that
could be handled by an AI-driven assistant, guided by parameters that
you set. This virtual assistant could perform an analysis of the client’s
question and have some suggested alternatives ready for you to review and
This system could be set so that there is continual analysis of your
client’s financial picture, suggesting options as the client’s situation
evolves. Perhaps they have a loan that could be refinanced or there has been a
recent change in the tax law that would trigger the system to
automatically review the impact on all of your clients. Similarly, if there were
a significant change in the management of a mutual fund used in one or more
client portfolios, your AI-based assistant could trigger an alert for the
advisor to determine whether that fund should be retained or replaced.
Costs of Falling
While these scenarios may seem futuristic, many of them are already
being implemented by industry giants. Lagging behind in technology can pose a
huge risk to advisors, especially those that are working with the next
generation of tech-savvy millennial and Generation X clients. These generations
are on track to be the beneficiaries of the largest intergenerational transfer
of wealth in history and expect their advisors to work with them on their
While AI and related technologies have not replaced human financial
advisors and are unlikely to do so, AI will enhance advisor’s analytical
capabilities and automate a number of mundane back-office tasks, reducing costs
across the board. AI and other technologies are a tool and advisors who wish to
continue to prosper will need to continuously stay on top of these
technologies and strategically incorporate them into their practices.
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