Whether artificial intelligence is being warmly embraced or fiercely rejected, there’s no question it has already made waves in the wealth management industry. AI tools, such as ChatGPT, have shown the potential to be effective and efficient at asset allocation, portfolio construction, and administrative tasks. While some firms have rolled out automated financial planning and investment services, others have created formal policies that restrict the use of such tools until the risks are better understood.
With the momentum AI has gained in a short amount of time and the opportunity for firms to gain a competitive advantage over their peers, there’s little doubt the industry will continue to innovate and invest in it, and that we will see additional use cases of the technology.
We may even see the risk-adjusted portfolio become a commodity. However, that doesn’t mean advisors should plan for obsolescence.
As skepticism and excitement abound about its practical applications, we must think about how to harness AI’s business benefits, while serving clients in ways technology cannot. We must reimagine the differentiated value from that of AI’s technical capabilities.
Understanding Vs. Analysis
Adapting to a new technology paradigm begins with critically examining where human interaction cannot be substituted—emotional connection and true collaboration.
Successful advisors already know that the most complex and challenging aspects of personal finance are not the financial, but the personal. They understand what keeps their clients up at night, and what motivates them. They invest substantial time to uncover the unique values, circumstances and goals of each client, serving as a thought partner who helps guide them through life’s difficult decisions.
Should a client use the proceeds from an inheritance to pay off their children’s student debt, establish a charitable trust, or buy vacation property? The answer depends on a multitude of factors, many of which have little to do with dollars and cents.
At SignatureFD, we believe there are only four things people can do with money: grow it, protect it, give it and live it—but doing so thoughtfully requires a connectivity that goes far deeper than numbers in a spread sheet. It’s important to understand the “why” behind the “what.” Wealth isn’t the end goal. It’s a tool. And, how you use the tool depends on what really matters for you. For some clients, growing wealth may be their top priority. For others it may be protecting their assets for the next generation or philanthropic giving. Some may be most focused on living out an adventurous retirement. Understanding that context is key to ensuring a financial blueprint aligns to the things most important in a person’s life.
AI can give us numbers that make sense. It can even help select the right balance of asset classes. But our human intelligence gives us the ability to help clients navigate the nuances of the decision-making process, empathizing with their hopes and anxieties.
Investing In New Skills
One of the greatest risks we see to clients’ goals are the emotionally charged decisions that cause them to veer off course. Whether constructed thoughtfully by humans or by technology, a financial plan is only as good as the client’s commitment to execute it.
There’s a reason we hire fitness coaches. They hold us accountable, ensuring we show up to workouts we may dread and encouraging us to work harder towards our goals.
While AI can make sense of volumes of data and analyze investment decisions, it cannot serve as an accountability partner. It cannot anticipate the emotional drivers that may cause individuals to try to change course of action, or counsel them when elements of their lives shift unexpectedly. When clients are faced with the stress of volatile financial markets or the loss of a primary household earner, the best advisors are able to counsel and console them so they can stay on track.
The role that advisors play in guiding clients during periods of financial stress with empathy is not replicable by technology. It’s essential that we equip them with training to perform this role at the highest caliber.
Upskilling advisors to enhance their emotional intelligence and coaching abilities will deliver outsized returns for your business over a long time horizon. I’ve seen firsthand the profound impact that training in behavioral finance and counseling can have on deepening client relationships. Empowering advisors with tools such as active listening, goal identification, and gamification principles results in more effective collaboration and better client outcomes.
A Complement, Not a Replacement
AI is not a substitute for personalized wealth management services. But it can be an accelerator, enabling advisors to spend less time on administrative work and more time on high-touch interactions with their clients.
Consider the time-consuming technical processes that have little bearing on client outcomes. For instance, operational tasks such as opening accounts, rebalancing portfolios, and record keeping can be automated with effective guardrails in place. Utilizing AI to respond faster to simple questions and requests for information can save time while materially enhancing the overall client experience.
The time recovered from low-impact work can then be reallocated to meaningful engagement and nurturing client relationships built for the long-term.
This is an exciting time for our industry. Though we are still in the early days, I believe it’s clear that AI won’t threaten the role of the advisor. However, its encroachment on the technical functions will spur an evolution.
AI’s power to create efficiencies will force practice leaders to rethink what they can offer beyond a plan on a page. Many would do well to take a thoughtful approach to integration, optimizing administrative functions and allowing advisors to focus on cultivating deep client connections that add value by driving better outcomes.
Amidst the commoditization of technical ability, advisors’ true value lies in empathetically coaching clients to live in alignment with their priorities. A true “partner” in every sense of the word. Leaning into our human intelligence will prove essential for genuine success.
Heather Robertson Fortner is CEO of SignatureFD.
