With Nvidia (NASDAQ: NVDA) up a staggering 72.12% year-to-date and sporting an equally jaw-dropping market capitalization of $2.13 trillion, it’s fair to say that artificial intelligence (AI) hype from 2023 has carried over into this year.
More importantly, that hype is rooted in increasingly solid fundamentals and usage cases for generative AI and more. There are profound implications for registered investment advisors as well. Owing to advancements in generative AI, there’s widespread speculation that this technology will eventually usurp some high-paying white collar jobs. Add that to the increased intersection of technology and investing and it’s not surprising that some registered investment advisors are fretting that computers and robots will eventually steal their jobs.
Indeed, there have been moments when some advisors have fretted their livelihoods will be imperiled by technological disruption. Fortunately, scores of polls and surveys confirm that while clients are embracing tech in many facets of their lives, they still want to know there’s a live human being managing their money.
The reality for advisors is that AI can be accretive to their practices when deployed the right way. Here are some tips for accomplishing that objective.
Important AI Ideas for Advisors
Andrew Altfest, president of Altfest Personal Wealth Management, a $1.6 billion New York-based RIA and founder of FP Alpha, outlines some of the relevant AI usage cases for advisors. It’s advice worth acknowledging because, in his recent article for Barron’s, touches on some of the client-facing advantages possible with generative AI.
For example, the popular ChatGPT generative AI platform can synthesize client meeting transcripts into digestible bites while efficiently setting the agenda and to-do list for the next meeting.
“Advisors can also use AI to break down long and complex reports into a more simplified and effective format for mass consumption. For example, when one of the CFAs at my firm composes a nine-page quarterly investment letter, we can tell ChatGPT to eliminate the jargon, simplify the concepts, use plain English, and turn it into a three-page letter. We’ve now strengthened our connection with clients who can better understand how we are investing and protecting their assets,” wrote Altfest for Barron’s.
Add to that, ChatGPT is a viable tool for generating thematic content and social media posts – two endeavors that many advisors don’t feel are among their core strengths.
Leveraging AI for Insights
One of the primary reasons AI isn’t a threat to advisors is the technology simply isn’t there to replace human research and securities selection. As one anecdote to that effect, for this piece I asked the ChatGPT app “What stock sector should I invest?” It returned a generic reply, noting several sectors that have performed well over time while telling me I need to do my own research.
However, generative AI is useful for turning larger and boring data and statistics into something that’s easier for clients to understand and that’s valuable in its own right.
“They’re evaluating your interaction to see if they should continue to trust in you and hire you for advice and guidance. AI can help advisors provide better, quicker, and deeper personalized advice which will aid in retention and bring us closer to the goal of providing expanded and enhanced services to more clients,” concludes Altfest.
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