Technology providers and innovators have delivered solutions to solve many operations headaches facing the wealth management industry. Yet, success was mainly limited to institutions with large IT departments to integrate and troubleshoot these platforms. According to Cerulli Associates, 94% of practice management professionals say limited technology integration still hampers productivity.
Much of this pain is because these solutions were created to address individual problems.
This technology patchwork approach common to the wealth management industry has been a failure instead of a fix for most RIAs.
As firms search for scale and continued growth in a highly competitive market, compounded by rising interest rates, they need tools that allow them to integrate teams, capital and clients efficiently, accurately and faster than ever before.
Today, most tech solutions provide artificial intelligence or automated capabilities through a chat bot-like interface. But when firms layer these solutions upon existing technology stacks, they often fail to support the core goals of the financial advice industry and the continued consolidation and growth of RIAs.
Artificial intelligence can help, but the industry needs a different approach to its technology infrastructure.
More than Sewing the Holes in the Quilt
Current technology suites fail most RIAs because each piece was created as a point solution. RIAs need a comprehensive approach that marries technical capabilities with refined industry and domain expertise to reap the benefits of the best AI-enabled technology throughout an enterprise.
Consider the task of form completion. Financial advisors spend more than 30% of their time on critical yet nonaccretive tasks like identifying, completing and submitting forms for events within their clients' lives. Even when this process is partly digitized, errors often occur, due to the one-off nature of the solutions at hand, forcing firms to resubmit documents wasting time and money.
But there is a solution.
Our deployments around the wealth management space have demonstrated that firms utilizing AI-enabled digital assistants in tandem with domain knowledge and well-managed customer data to complete these tasks see positive results. They achieve significant time savings, reductions in NIGOs, and a seamless experience for advisors and their clients.
However, most AI-enabled solutions do not provide this kind of integration and likely fall short of expectations. Lesser AI systems can deliver some value to RIAs addressing these administrative requirements, but there is much more potential.
The client meeting sits at the center of the advisory experience. A successful meeting will include references to birthdays, anniversaries and other critical life events in addition to deliverables updates and future action items.
Industry-specific AI-enabled assistants can track these details and provide an advisor with a customized agenda for the meeting, record it and transcribe it in compliance with all regulations. It can also automatically create action items with follow-up alerts—removing the significant potential for human error or incomplete tasks.
For deep integrations to succeed, the industry will need a comprehensive overhaul of its reactionary technology strategy by focusing less on individual fixes and more on how new technology can advance an RIA's core business.
Brains and Brawn of AI
The lack of embedded domain expertise within most AI-enabled solutions is another drawback to haphazardly created technology solutions; even the strongest programs need to know what they are doing.
The industry's regulatory framework provides an incredible foundation for applying AI-enabled digital assistance. The highly regulated financial advice business sets up guardrails for these assistants to operate within—driving efficiency and accuracy.
Over the past several years and thousands of interactions, we developed a sector-specific knowledge graph. Knowledge graphs are conceptual maps that group together firm- and industry-specific topics, terminology and content to provide AI-enabled solutions with a knowledge base to interpret user intent and produce customized guidance. Without knowledge graphs, AI algorithms must learn from scratch, at times an inefficient process that may not lead to optimal responses.
Put differently, knowledge graphs give the AI-enabled digital assistant work experience along with its nearly instantaneous analytical skills. It's the brains behind the operation.
Due to the crucial role in training algorithms, knowledge graphs are critical to the greater adoption of AI across the financial sector, not just within the wealth management industry but also across functions in different sectors.
Traditional AI takes a brute force approach to machine learning that ultimately limits the potential of this technology—especially within the more nuanced RIA space.
We Need to Make the Change
If the RIA space continues to see significant consolidation and growth, there needs to be a different approach to technology solutions. Integrated-AI programs could drive meaningful returns for all stakeholders by simplifying many processes, which allow advisors to build their business and enhance their clients' experience.
We know what needs to be done—it will take time and resources.
In an industry known for advising clients to look for long-term benefits and smart investments, this shift in technology strategy makes perfect sense.
Sindhu Joseph is CEO and co-founder of CogniCor.
