Advisors Are Reaping AI Rewards

At the investment level, artificial intelligence (AI) was one of the most prominent (and rewarding) themes in the first of 2024. In terms of prominence, expect more of the same in the second half, but there’s more to the story.

While so many clients and retail investors are enthralled AI-related equities and funds, this technological megatrend has well-documented implications for advisors practices, most of which extend beyond merely allocating to AI within client portfolios. Fortunately, the “robots are coming for my job” phase appears to be in the rear view mirror and largely unfounded.

Actually, there’s ample evidence suggesting clients want to work with fellow humans (advisors) and that money management firms are benefiting from technological advances, including AI. One takeaway is that the advisors that are slow to embrace AI or eschew it altogether risk being surpassed by rivals.

Don’t think twice about that because scores of research and surveys confirm that today’s clients, particularly the younger ones, make advisor hiring/firing decisions based in part on technological proficiency. Said another way, advisors that more widely embrace tech, including AI, may just find that conversion and retention rates increase.

Good Reasons for Advisors to Embrace AI

Clearly, improved prospect-to-client conversion and retention are compelling reasons for advisors to expand AI adoption, but there are other strong reasons, too. Those include issues that are more germane to everyday practice function.

A recent Horsemouth survey of 400 community members indicates that AI has been a boon for advisors in terms of enhanced productivity, content creation and writing improvement. The research firm said 56% of respondents use AI to convert ideas and musings into drafts of copy and 46% use it for drafting emails.

“Best benefit for me is I will write either a response to a client, or even a white paper on a subject, then ask ChatGPT to revise it. It does come back with generally a much better presentation of the idea, thought or concept.” Another advisor noted: “It creates new ways of expressing an idea that I wouldn’t have thought of. Excellent for drafting an email, speech or even generating newsletter idea,” said some of the advisors that were polled.

Some advisors may be strong writers, but many will readily admit they’re not or that they don’t want to spend considerable time on that task, particularly when it comes to brief communications such as bullet points, quick summaries and the like. Currently, AI shouldn’t be used to pen extensive pitches or market summaries, but it is functional for short “scripts” and the ensuing time savings is attractive to advisors.

AI Gap Among Advisors

Horsemouth notes that just 38% of the advisors it queried are currently using AI. One way of looking at that statistic is that the advisors that quickly leave the other 62% could get a leg up on rivals.

Getting there requires increased AI confidence, which the survey indicates is currently in short supply. Expect that to change.

“Only 34% feel confident in their ability to use AI effectively (and) 29% don’t feel confident in their AI skills,” according to Horsemouth. “Usage for key practice management tasks such as training, policies, hiring and HR were in single digits.”

Related: Why Advisors Should Embrace Improv Techniques