Financial advisors can use generative artificial intelligence to help them achieve “personalization at scale” within their practice. Now, we’re at the implementation stage, said speakers at WealthManagement.com’s RIA Edge West conference in Marina del Rey, Calif.
“The good news is, personalization at scale is here,” said Jason Pereira, senior partner and financial planner at Woodgate Financial. “The bad news is, it’s going to further commoditize the work we do because, quite frankly, the faster everything gets, sooner or later someone takes those efficiency gains and basically tries to lower the cost of entry on these types of things, creating pressure on margins and trying to make up the difference on volume.”
Pereira and Brian Portnoy, founder of Shaping Wealth, presented a framework for providing personalization at scale. It involves a combination of people and technology.
Pereira provided a number of examples of AI-based technologies that advisors can use to do so, including ARQA, Holistiplan, Wealth.com and Focal.
He referenced a Kitces.com study that found that the average advisor spends about 26.7 hours a week on client servicing needs. With the exception of 8.8 of those hours spent in meetings with current clients, the rest of that pie is up for grabs, meaning those tasks can be enhanced through AI.
“Everybody is trying to figure out personalization at scale, meaning that you care about your clients deeply and want to serve them well,” Portnoy said. “You want personalized advice, deeply human advice. But if you’re not growing, you’re shrinking.”
The modern advisor wears two hats, as both mechanic and guide, Portnoy said. The mechanic role is the technical aspect of the business, including all the dimensions of financial planning, investments, insurance, estates, selling a business and planning for retirement. Those mechanics represent 93% of the CFP curriculum.
The guide focuses on the human side of money. In 2021, 0% of the CFP curriculum was devoted to the psychology of financial planning. Now, it’s 7%. This is the aspect of an advisor’s role that AI can’t fully take over.
“Guides help other humans navigate uncertainty and change,” Portnoy said. “Ultimately, you’re helping people move along the journey toward what I call ‘funded contentment’ or ‘true wealth’—the ability to underwrite a life that is meaningful to you.”
One aspect of being human is emotional intelligence, he said. And there are four dimensions of EI: self-awareness, self-management, empathy and social skills.
Empathy is a big part of what advisors do as guides to their clients. He defined “empathy” as trying to understand the emotions someone else is having.
“Being empathetic—it’s creating a space where you are listening; it’s believing something when someone tells you it to be true; and it’s asking good follow-on questions. It’s basically the ability to take the perspective of others,” he said.
Can AI be empathetic? “Yes-ish,” Portnoy argued. There are three dimensions of empathy: cognitive, understanding others’ perspectives; emotional, the ability to feel the emotions of another person; and experiential, which is following up to contiunue to demonstrate empathy. He said AI has gotten pretty good at the first dimension.
“If you’ve had a conversation with AIs and you let it flow, you sort of feel seen and heard. That’s that cognitive empathy that feels quite good,” he said.
It also can follow up. It can pick up on tone, sentiment and emotional cues. It can give contextually appropriate responses. It has perfect recall and uses reflective listening techniques that we would teach in a coaching program.
“Many of the things we associate with empathy, AIs already do pretty well. And by the way, it’s not like the technology is ever going to be this bad again.”
Emotional empathy, however, is tough for AI.
Can we use AI to be better trained in empathy? Yes, Portnoy said, we can use it to improve our skills as guide, and therefore shift the conversation from ‘personalization at scale’ to ‘humanization at scale.’
Take Lydia, for example, an AI assistant that Shaping Wealth has developed in partnership with Alai Studios. Lydia can help advisors prepare for meetings and mock up a psychological profile of clients. The tool can also help advisors in discussions with clients,
Including advice on navigating difficult conversations, behavioral marketing and the connection between money and happiness.
“Will AI put us out of business? Obviously not,” Portnoy said.
But it does create an opportunity for advisors to expand their margins and become more competitive by deepening clients’ engagement.
