The introduction of new technology in the wealth management space often comes with a prediction that it will replace the human advisor. It happened with portfolio management software, online brokerages and robo advisors. Now, those same sorts of predictions are happening with generative artificial intelligence. But panelists speaking at the Future Proof Festival this week in Huntington Beach, Calif., argued that since those previous advances did not supplant advisors, they are skeptical AI will either.
Instead, advisors should think of AI as a “power assist, not a replacement,” said Kristie Edling-Day, executive vice president and chief information officer at LPL Financial. She referenced an April J.D. Power study that found that Generation Z, more than any preceding generation, prefers face-to-face interactions with advisors, followed by digital and then phone calls.
Advisors need to be aware of the hype versus reality around AI, she added. The talk right now is that it’s a silver bullet and will replace an advisor’s back-office staff.
“Think about technology and AI in particular—it’s an optimizer,” she said. “What are the things that you do already that are really important for your business and how can you use technology to do them better or faster? It’s not from this really lofty, ‘How do we completely eliminate roles?’ It’s, ‘how do we eliminate tasks, or how do we make tasks more efficient?’”
For example, when LPL implemented a new rebalancing tool, the process was reduced from five to six minutes down to seconds.
LPL is currently piloting an AI chatbot for use within its service centers. The firm has a large service center supporting its more than 20,000 advisors, but there’s a large disparity between the experience that the advisor brings versus the service center associates. The chatbot is helping to close that disparity.
“Those service associates that are using it consistently—the power users of it—we’re seeing the right the first-time answer jump from low-70s to the mid-90s,” Edling-Day said.
Sid Ratna, CMO of Financial Advisor Services at Vanguard, agreed that there’s a lot of hype around generative AI. But there’s no elimination of the human in this space. In fact, it can only help to amplify the value of the advisor.
“This is a people-based business,” Ratna said. “As generative AI gets more prevalent, the premium for an authentic human relationship gets 10 times more valuable.”
“The question isn’t, how do we disintermediate financial advisors or wholesalers?," he said. "The question is, how do we free up your time so you can do the things that are most accretive to your business and grow your business?”
