AI Can Be Helpful for FAs—but Mostly In-House for Now

Technology, particularly artificial intelligence, will continue to play a role in how financial advisers work with clients and could make advice cheaper and more expansive, according to financial service leaders speaking during an eMoney Advisor LLC virtual summit on Wednesday.

“If we go back hundreds of years ago, only the wealthiest Americans had access to some type of financial advisement,” said Maxwell Lane, CEO of Flourish Financial LLC, an adviser financial products and tools platform. “Fast forward to today, and it’s a much larger swath of people.”

When discussing the potential for technology, and particularly generative AI, to transform financial advisement, the speakers from firms including Allianz Life, Fidelity Investments and Nationwide all pointed to internal, practice management roles for AI, rather than client-facing uses. Examples of AI implementation included back-office administration, summarizing client meeting notes and identifying potential clients.

“I see more AI usage in those areas [such as back office and client identification] in the short term; long term, we will have to see,” said Judy Lee, vice president and platform consulting team lead for Fidelity Investments.

For many retirement plan advisories either working directly in wealth management or via partnerships, staffing correctly for individual advisement can be difficult—but technology, according to the speakers, may be able to help streamline client management.

Erin Tyra, director of registered investment adviser annuity distribution at Nationwide, said the insurer is building its own AI tools to “remain competitive in the marketplace” for emerging technology. One project, she said, is focused on helping financial advisers best manage and interact with clients.

“What is the best cadence for email vs. phone call vs. in-person meeting?” Tyra asked. “We are trying to develop an AI tool that will prompt our advisers to see that it’s a good time to reach out by email to Ms. Smith or this would be a good time to set up an in-person meeting with Mr. Johnson.”

If an adviser has a large book of clients, this type of outreach can be “overwhelming,” she said. The AI tools can help “make advisers better with their relationships and identifying gaps in service.”

Broadening Access

Lane, of Flourish, sees technology as not just helping wealth managers improve their practices, but continuing to lower the threshold of assets a client will need to get advice.

“There’s a real desire from financial advisers who want to help as many people as possible, but they also have to run a successful, sustainable business,” he said. “With AI, as advisers get more efficient over time … the net effect should be, if a firm can serve a $500,000 client today and that was their minimum, in the future, it’s going to be $250,000, and someday $100,000, and then $50,000 … that should allow for more Americans to have access to advice.”

Tyra, of Nationwide, noted that if advisers are going to use technology, they must really understand it and ensure it fits within their fiduciary duties and regulatory framework. Advisers should use the technology where it fits, she said, and then take the time saved to lean into the more human-centric services.

“If the technology is really good at interpreting source data, for example, can you fill that gap by learning more about clients’ behavioral financial issues?” she said. “They can tap into those areas where the algorithm cannot meet those needs and where you can bring in that human angle—really lean in there.”

A report released Wednesday by consultancy Cerulli Associates and Osaic Inc. emphasized the growing demand from investors for services beyond just money management.

According to the report, 55% of investors consider an adviser’s understanding of their financial goals, needs and risk tolerance when choosing an adviser, a larger percentage than those who consider the performance of their investments relative to the overall market (46%). That demand, according to the report, is driven by greater market volatility, the “continued decline of employer pensions as a funding mechanism for retirement” and an increasingly complex array of investment options.

Broadening Services

AI and technology may free up advisers to provide “more services like taxes or bill pay or educating the next generation,” noted Fidelity’s Lee. “All of those are going to be part of wealth management. … With technology, [advisers] will be able to pre-empt what their clients will need before they ask.”

John Helmen, head of national accounts for Allianz Life Insurance Co. of North America, agreed, noting that technology should, in time, allow advisers to lean further into their “soft skills” and work with clients on more holistic needs.

During the panel, moderator Brandon Tucker, an advisory financial planning practice management consultant for eMoney, noted that surveying has shown that financial advisers are more concerned about robo-advisers replacing their business than generative AI. The panel agreed that AI will not replace human advisers, though Lane, of Flourish, did note that generative AI is likely more threatening than robo-advice.

“I think it’s interesting that they were more fearful of robo-advisers than they were [of] AI, because I think [AI]’s much more impactful,” he said, reiterating that the “human touch” will always be needed for financial advisement.

Helmen, of Allianz, said that as AI takes on more tasks, it may lead to even more work, and opportunities, for humans.

“We all know that holistic advice is now the benchmark, but if you can use [AI] in the right way, you should be able to add more value and build a better experience altogether,” he said. “This AI revolution we are taking about is going to take time, and it’s going to be slow, but the goal here is to provide the better experience for the end user.”