Wealth management firms should already be using artificial intelligence (AI) tools to remain competitive, save time and offer clients more personalization, industry experts said July 23, during a webinar in which they also explained how firms could maximize their AI investments by using “Moneyball” principles.
The data analytics provided by AI can, after all, uncover hidden opportunities in portfolio construction, risk assessment, client segmentation and personalized financial advice, the speakers pointed out. They also discussed practical strategies for firms to effectively allocate their AI budgets, measure their ROI, and scale up successful initiatives across their organizations.
An Expert Assistant
Among the key takeaways: Embracing AI in wealth management can deliver significant returns via enhanced operational efficiencies, increased client engagement and informed decision-making, according to Sindhu Joseph, Founder and CEO of CogniCor Technologies, which specializes in AI solutions for wealth management firms.
Using AI tools for client reviews, servicing and data-driven personalization allows firms to improve client satisfaction, foster loyalty and even potentially extend their reach to a wider range of investors, contributing to overall growth, Joseph noted.
Advisors now spend about 8-11 hours preparing for a meeting with a client and then doing more work after the meeting, she said. “This time can be saved using the AI tools,” while also delivering personalized advice, Joseph said.
“AI is going to be that expert assistant for every single advisor,” she predicted, adding AI tools can be thought of as “kind of a [Microsoft] Copilot” for advisors.
Starting Yesterday
However, Moderator Craig Iskowitz, Founder and CEO of wealth management consultant firm Ezra Group, playing devil’s advocate, asked her whether personalization wasn’t just a “buzz word” thrown around a lot, adding the technology driving AI tools can’t even deliver personalization now.
Joseph conceded that many consumers don’t want to be treated differently than anybody else but said personalization is something that advisors see major benefits from.
Asked by Wealth Solutions Report if all RIA firms will eventually be using AI and, if so, by when, Joseph responded, “yesterday,” with a laugh.
AI is already “integrated into many tools” and advisors “should be using it starting yesterday because, if they don’t, rivals will be “far ahead” of them in terms of efficiency gains and client satisfaction, while being provided with better products.
All the RIAs who are looking at building their firms and expanding their portfolios should be using AI tools, she said, adding it is best for firms in the financial services sector to use end-to-end solutions to get the most from AI technology instead of integrating a bunch of solutions on their own.
Agreeing, Lee Davidson, Chief Data and Analytics Officer, at Morningstar, said: “The trend should be towards everyone using [AI] as quickly as possible.” Davidson pointed out he was surprised more advisor firms weren’t at least experimenting with the technology already.
Davidson added: “There’s just too much value there for I think every firm not to be having at least a foot in the water on ‘what can this do for us’ and running the risk of being outcompeted.”
Meanwhile, implementing thorough testing and ground truth analysis for generative AI applications tends to provide a higher ROI by ensuring accuracy, maintaining compliance and reducing reputational risks, according to Davidson.
Sharing those results transparently stands to help establish trust and collaboration between firms and their AI partners, Davidson said.
AI Portfolio Management
Also agreeing that leveraging generative AI in portfolio management enables advisors to achieve greater efficiency and effectiveness, maximizing the value of their time and efforts, was Henry Zelikovsky, CEO of fintech firm Softlab360.
Combining AI-generated content with tailored portfolio analyses, advisors can also amplify their impact, effectively serving more clients while preserving the essential human touch in their relationships, according to Zelikovsky.
“We have seen generative AI do some amazing things when it comes to creating content like text, music, even video,” according to Iskowitz. “But, come on, seriously, there's no way AI could replace humans with complex jobs like portfolio management?” he asked Zelikovsky.
“I don't think it can at the moment,” replied Zelikovsky. “However, I think that the results are fairly good at the moment considering that it's really a new entry for many people who try it out. I think the early cycle of producing content in a particular context has shown good results.”
From Pipe Dream To Required Plumbing
Kicking off the webinar, Iskowitz said: “While we all see the pace of technology changing so fast, it’s never going to be as slow as today,” and is always going to be getting faster. “Look at just the last five years with AI,” he said.
“Five years ago, we weren’t really even talking about it,” he said of AI. “No one was really using it, except in very targeted use cases. So we seem to have dashed in just the last two years from AI being a pipe dream to being required plumbing for every firm in wealth and asset management.”
He went on to share some statistics from a recent report by NVIDIA, one of the key tech firms that has been “driving the generative AI revolution,” he said. NVIDIA found that 43% of respondents to a financial services study this year were already using generative AI in their organizations, said Iskowitz.
“That’s an incredible upswing from zero, effectively, two years ago, to 43% already using it, and 46% using large language models” (LLMs) that he said are “powering most of the generative AI tools.”
Iskowitz also pointed to data from International Data Corp. that he said showed spending on AI-centric systems is forecast to reach $150 billion this year, and then double to $300 billion by 2026. “Not to scare you, but 2026 is less than two years away,” he noted.
Jeff Berman, Contributing Editor & Reporter at Wealth Solutions Report, can be reached at jberman@wealthsolutionsreport.com.
