Advisers Believe AI Will Create Competitive Advantage

Two-thirds of registered investment advisers (RIAs) and fee-based advisers believe Artificial Intelligence (AI) will give them a competitive advantage, a survey by Nationwide Advisory Solutions found. Among the 33% who are early adopters, 94% of this group believe AI gives them a competitive advantage.

The way advisers are using AI is to transform every aspect of the customer experience, attract a new category of future clients and open the door to a new universe of products and solutions.

“Once the exclusive domain of large institutions with deep pockets, and most recently utilized by consumer giants such as Amazon and Apple to ensure ease of use and customer satisfaction, RIAs and fee-based advisers are now adopting Artificial Intelligence to enhance the human connection with clients—and gain an edge over the competition,” says Craig Hawley, head of Nationwide Advisory Solutions. “RIAs and fee-based advisers are leveraging AI to understand clients, predict their priorities and provide holistic financial planning.”

Artificial Intelligence uses advances in machine learning, including refined algorithms, predictive analytics, natural language processing, speech recognition and image recognition to asses big data from disparate sources, evaluate complex problems and help advisers make more accurate decisions. While only 33% of advisers are currently using AI, 51% plan to begin using it or expand their use of it in the next 12 months.

Among the early adopters, 88% began using it in the last 12 months, and 84% plan to expand their use of it in the next 12 months. Thirty-seven percent of the early adopters say their profitability will expand substantially in 2018; by comparison, only 22% of advisers who are not using AI say the same. Thirty-four percent of the early adopters say they are optimistic about the financial outlook for 2018, compared to 26% of the advisers not using AI. Fifteen percent of the early adopters manage more than $250 million in assets, compared to 11% of the advisers not using AI. In addition, 16% of the early adopters earn more than $500,000 a year, compared to 11% of the advisers not using AI.

Among the investors, advisers, and early adopters who believe that Artificial Intelligence will improve the adviser/investor relationship, all three groups say that the top ways AI will improve this relationship include increasing accessibility and affordability of financial planning (46%, 42% and 40%), and making accurate predictions about clients’ future needs and behavior (39%, 38% and 38%).

Thirty-seven percent of RIAs and fee-based advisers, and 50% of early adopters say AI will help them protect clients’ assets against market risk. In addition, 35% and 48%, respectively, say AI will help them understand clients’ current needs and behaviors, clients future needs and behavior (33% and 41%) and to provide more personalized, holistic financial planning (27% and 36%).

However, 54% of investors say there are cyber security risks associated with their sharing personal and financial information.

The Harris Poll conducted the online survey of more than 1,700 advisers for Nationwide Advisory Solutions in January and February.