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Written by: Rick Dennen | Oak Street Funding
Wealth advisors are a busy group. Trying to stay on top of market trends and clients’ portfolios can leave little time for direct client interactions. Surprisingly, it looks like technology, in the form of artificial intelligence (AI) tools, may help to provide a solution.
Read on to learn about use cases and caveats for AI in wealth management, as well as tips for choosing appropriate AI tools.
What’s the problem?
Registered Investment Advisors (RIAs) must manage masses of data every day. This includes balancing market action with client risk profiles, keeping up with government reporting regulations, and prospecting for new clients and maintaining records of contacts. And all this is happening against the backdrop of a years-long shortage of advisors in the industry.
Is it any wonder RIAs feel squeezed? There’s hardly any time left for what clients crave most – one-on-one connection with their advisors. But new AI packages offer hope for smoother management and improved client engagement.
Use cases for AI in wealth management
In past years, technology has held promise for transforming wealth management, but it’s never quite lived up to the hype. With the advent of AI, however, the situation has changed dramatically for the better. Here’s a look at just a few ways AI can give time back to busy wealth advisors and support the bottom line:
- Streamlining onboarding – Getting all the right forms to new clients and making sure they’re all completed correctly often takes weeks. With an AI-powered system keeping track of which forms have been sent out, which have been received, and automatically prepopulating data where appropriate, this process can be reduced to days or even hours.
- Analyzing market trends – AI tools can keep an eye on the markets and produce automated insights even while advisors are meeting with clients or prospecting for new business. They can be trained to watch for specified trends or events and alert advisors when those occur. This intelligence allows advisors to use their time on strategic analysis and direct client contact, while it also provides them with actionable market information.
- Analyzing strategy against performance results - AI can help advisors continuously compare portfolio performance to client goals and risk tolerance, highlighting both growth and underperformance and enabling faster, data-driven adjustments and more informed client conversations.
- Facilitating outreach - AI can monitor data across a wide variety of systems, gleaning information about a client’s or prospect’s life events, such as their house going on the market, a CD maturing, or a child heading to college. This information gives advisors a way to reach out to clients or prospects in real time with suggestions tailored specifically to their lives – truly personalized service that translates into improved client engagement and more referrals.
- Streamlining compliance workflows – AI can reduce the number of false flags while properly identifying disclaimers. It can also decrease the number of manual tasks required for compliance teams and shorten document approval from months to seconds. These time savings can translate directly into more time for strengthening client relationships.
- Creating personalized marketing materials – Generative AI shines in this area. Pulling information from client records, it can produce tailor-made marketing materials aimed directly at each client’s interests and preferences. Clients receiving bespoke updates rather than the cookie-cutter quarterly reports of the past are likely to feel more engaged with the firm and their advisor.
- Preparing materials for client meetings - AI streamlines meeting prep by generating tailored reports, summarizing portfolio changes, and drafting agendas. Advisors spend less time on admin and more time on strategy and client relationships.
Using AI wisely
AI is a broad technology that underpins many different tools. To choose the right tool, it’s important to start by identifying the firm’s needs. Experts recommend starting with one area of the business – say, compliance, marketing, or document processing – and applying AI to it. As the team becomes comfortable with the new technology, it can be expanded into other areas of the business.
It’s also important to remember that artificial intelligence can’t take the place of human intelligence. Its results are only as good as the prompts it gets, so it is worthwhile having team members trained on how to write the most effective prompts. Finally, one shouldn’t trust all results AI produces. It’s crucial to apply an experienced eye to all AI responses to see if they make sense and rework the prompt if confusing or inaccurate results are produced.
Cybersecurity considerations
AI can be a powerful tool, but it can also add to the cybersecurity risks wealth management firms already face. Third-party vendors like AI producers are a growing source of cyberattacks, as bad actors exploit vendors’ vulnerabilities to reach the systems of their clients. Firms should take a proactive approach by conducting thorough assessments of any AI provider’s security protocols before implementation. Before choosing an AI package, it’s critical to do an assessment of the vendor’s cybersecurity measures. This worksheet from Visory.net is a good place to start.
Internally, ongoing staff training remains essential, as human error continues to be a leading cause of breaches. RIAs should also have a dedicated IT resource or partner to oversee risk and compliance, maintain appropriate cyber insurance coverage, and enforce clear policies around device usage and system access. Together, these steps help ensure innovation doesn’t come at the expense of security.
Making it happen
Deploying new AI tools may require an investment in equipment, software, and expertise, but that investment is likely to pay big dividends. Some RIA firms leverage working capital loans to facilitate the process.
AI isn’t going away, and it’s a sure bet that other advisors are using it. Not only does it make life easier for busy RIAs, but it also helps provide the top-level service clients expect.
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