What AI Can, and Can't, Do in Wealth Management

It’s no secret that applications like ChatGPT have thrust artificial intelligence into the spotlight. However, many don’t realize that ChatGPT is one of thousands of AI-based programs that stand to transform the way we live and the way we do business.

The wealth management industry is certainly part of this technological revolution and has already implemented technology in its day-to-day operations. With this advancement, the debate and controversy continue to grow around privacy, regulation, which elements of financial advice will be or should be digitized, and what the impact will be.

Improving on Existing Technology

With almost all large wirehouses and many large RIA consolidators having bought or integrated a pure, true robo-advisor platform, it has become clear the industry believes that the future is in algorithms and digital advice, even for high-net-worth individuals and future generations, and even includes more sophisticated services.

As one of the first efforts to roll out AI to the public, ChatGPT reached 1 million users in just five days. In comparison, Facebook took nine months and Twitter took 24 months to reach the same number. Now likely the fastest-growing app in internet history, industries including financial services have quickly realized the need to embrace, yet control, where artificial intelligence has value and are scrambling to address regulation.

To stay competitive in the wealth management industry, we must continue to innovate, while thinking and working more efficiently and creatively. The capabilities of AI and its use cases are certainly impressive, and there is clearly opportunity for non-value-added work/services to be handled more efficiently and effectively using emerging technologies.

Financial professionals can continue to find ways to expand their client base and serve smaller accounts with the help of technology. Some examples of how AI can potentially support financial professionals as they grow include:

• Client service: One of the great benefits of AI platforms and various chatbots is the ability to assist with routine customer interactions, like scheduling and administrative questions. If used correctly, AI and chatbots can improve the overall client experience by responding almost immediately to inquiries and effectively reduce a financial professional’s overhead.
• Data analysis: AI also brings value to financial professionals in the way it can absorb and analyze large amounts of data, while delivering easy-to-understand findings and recommendations. Whether it’s helping with paperwork on the operational side or narrowing down a list of potential investment recommendations that might make sense for a client based on their unique inputs, AI can save a lot of time, allowing financial professionals to spend more time with their clients.

People Skills Remain Dominant

Empathy, emotional coaching and relationships are valuable human elements that financial professionals bring to their clients — elements that I don’t believe an algorithm will ever be able to provide, at least not in my lifetime. AI can help automate tasks and streamline the monotony of some work, but it still has its shortcomings that require partnership with its human counterparts.

I’ve often said that we’re in a relationship business — no matter how sophisticated a piece of technology might be, there’s no substitute for the human element of wealth management.

Financial professionals can offer personalized service, emotional guidance during bull and bear markets, and support with difficult financial decisions. These are important value-adds that aren’t going away soon and include:

• Personalized service: All areas of financial planning, but particularly tasks like estate planning and goal-setting, require personalization. We’re human. Every client has a unique story and unique circumstances that are constantly shifting based on various life events. The ability for financial professionals to sit down with a client, understand their life at a deep level and develop a truly personalized plan that meets their needs is something that technology can never fully replace.
• Emotional guidance: Financial stress and uncertainty can make it difficult to make rational decisions, particularly in periods of high market volatility. The emotional support that financial professionals can give during challenging times is irreplaceable. AI and other forms of technology can certainly help a financial professional and their client come to the right conclusions, but there’s simply no substitute for the ability to pick up the phone or meet in person to talk through different scenarios.
• Support with difficult decisions: Very much in line with personalized service and emotional guidance, financial professionals can help support clients through difficult financial decisions. Finance is often an emotional topic in a client’s household. Having somebody who is a subject matter expert who can relate to you on a human level and can guide you through a tough decision is invaluable. This again is where the human touch of wealth management really shines.

The Future Is a Blend of AI and People

Ultimately, I see AI as a tool, not a replacement. Technology and the human touch can complement each other to benefit the end client, which is the goal for all of us in this industry. From the technology side, I think financial professionals will use new tools like AI to be more efficient in many areas of operation, giving them more time to focus on their clients.

From the human side, there’s no replacing that personal relationship between client and financial professional. Human elements like trust, effective communication and empathy are key aspects of what financial professionals bring to the table.

Wealth management firms will thrive when they find solutions that enable financial professionals to leverage technology to increase productivity and enhance the value of advice. I believe we are at the dawn of that era.

Amy Webber is CEO of Cambridge Investment Research.