Wealthtech experts say advisors who don't embrace AI now are 'crazy'

July 18, 2023 7:00 PM

As Craig Iskowitz set the stage for an AI-focused roundtable discussion with some of wealthtech's most recognizable brands, he led with a trio of quotes that speak to the current craze surrounding those two letters.

The first two quotes, from Accenture and a U.N. agency, were about how the technology is poised to make the business landscape even more competitive and that countries with the highest rate of AI usage are currently seeing the lowest unemployment rates, respectively.

Craig Iskowitz, founder and CEO of strategy consulting firm Ezra Group

The third quote, from OpenAI CEO Sam Altman, was more ominous but no less complimentary about the power of AI to supercharge any industry it touches.

"His quote is, 'AI will probably lead us to the end of the world. But in the meantime, it will help build some great companies,'" said Iskowitz, founder and CEO of strategy consulting firm Ezra Group. "I don't think the end of the world is coming anytime soon with AI, but there are some great companies on the panel here."

Last week, Iskowitz served as moderator of the AI & Automation Summit for Financial Advisors, a nearly two-hour-long virtual event aimed at growth-minded advisors and wealth managers itching to weave the latest AI technology into their practices.

Part discussion and part presentation, the event featured speakers Josh Smith, CEO of VRGL; Andrew Altfest, CEO of FP Alpha; Anand Sheth, CEO of Pulse360; and Rick Williamson, director of training at Redtail.

The summit also included a special appearance from Snappy Kraken's Angel Gonzalez, who gave the first live demonstration of the "AI Content Helper," a new capability coming to the financial services marketing platform.

Along with exploring the distinctions between technologies like generative AI, machine learning and robotic process automation, the summit focused on practical applications of AI that advisors can take advantage of today.

To illustrate that, the speakers showed a complete prospect journey facilitated by AI-powered tools currently available from the participating companies. From first contact to follow-up client communication, the audience saw how an advisor armed with these tools can deliver increased functionality without adding more hours to their day.

"I was in the advisor world for two decades," Sheth said. "I am really upset this technology wasn't there for me two decades ago, because it would have saved a ton of time."

When the demos were done, the panelists dove deep on some of the burning questions surrounding artificial intelligence's impact on wealth management, including one observers have been asking since ChatGPT burst into the mainstream in November 2022: As AI takes center stage, will it push human advisors into the background?

No chance, said Iskowitz and the panelists. They instead highlighted the ability of AI to drive human engagement as opposed to discouraging it.

"[End clients] are being inundated with different examples of AI, whether they know it or not. … They're going to start expecting that from their advisory experience as well," Iskowitz said. "And the more firms use AI, the more their employees become engaged. It doesn't disengage employees and cause employees to be laid off. It causes them to be more engaged because they're freed up.

"The work that they're normally doing manually building spreadsheets, manually exporting data, building reports manually from different systems can be automated in AI. And those employees can then move up the food chain, up the value chain, and provide more value and do things that are of higher value for their clients."

Scroll down to check out some of the most important takeaways from the summit regarding AI security, implementation and innovation in wealth management.

Security

Altfest said his firm approaches data and security by beginning any AI-aided process by asking what sensitive data is really needed to perform a given task.

And if that data is not necessary, why collect it at all?

"When it comes to the way that we use AI, and we have our own language model that we've developed for reading documents, wills and trusts, other legal documents, we actually don't keep the documents, and we don't take the sensitive information from documents," he said, adding that once the information is read by the AI tool, it is immediately deleted.

"I think the best thing that you can do is say, do I really need to submit confidential information? And in the case of ChatGPT or other AI, you don't even want to be sharing sensitive information because you're not confident that it won't come back to be regurgitated," Alfest said.

Williamson said that financial technology companies that are going to be implementing AI in their own processes will be required to follow the same SEC or FINRA rules and regulations that apply to advisors themselves.

"And that's good. When you're talking about ChatGPT or Bard or whatever, they don't follow those regulations. So it's very similar to using other pieces of technology where there's just a good rule of thumb. Don't put any PII [personally identifiable information] in there," Williamson said. "You can do some really creative stuff with ChatGPT. As an example, I asked for an engagement plan for a client who is male, 63, married, divorced, two children, $2 million in assets. None of that is PII. And it's very usable information to be able to brainstorm."

Rick Williamson, director of training at Redtail

Sheth said one thing that keeps him up at night is the rate at which free AI tools are popping up all over the place. He warns advisors curious about those kinds of tools that they come with a cost.

"It's never free. You are the product; your data is the product in that case. That's why you do want to consider what I think has already been mentioned: Use AI with firms that are in the industry," he said. "We're highly regulated from the SEC, FINRA, state regulations, all of this. And we pay attention to those things to make sure we're kind of keeping all of this within bounds. Obviously, folks that are outside of the industry, they may have an amazing tool, but that's not generally their focus."

The next five years

Looking to the future, Iskowitz pointed out that Accenture recently interviewed 100 strategic digital executives in the wealth management industry in North America on their use of artificial intelligence, and 84% of these executives agreed that AI will transform the wealth management industry within the next five years.

With that statistic in mind, he asked the panelists what they see as the next big benefit for advisors around AI.

Smith said one benefit could eventually save advisory firms a lot of money: the ability to operate with a smaller support staff.

"Whether it be pulling data, putting together presentations, writing emails, documenting notes, I think that all of those aspects … I'm not going to say they're all going to be tackled, but I believe that we're going to be in a position where they will," he said. "We used to have a saying in my prior business: Turn data workers and information workers. So to whatever extent you're building presentations, documenting notes, writing emails, manipulating data, you're going to have the ability to probably just be moving things around and deciding what you want to use, as opposed to having to do the building. And that's the area that I think AI will really create a lot of value."

Adding to that point, Altfest said when you look at the current state of the industry, so much has been squeezed out of the back office, which is often where all the efficiency has come from.

"Productivity gains have come from squeezing as much out of the back office to automate things that are repetitive and not a good use of our time. But the next opportunity is clearly with the work that the advisor does all day long. And I think there's going to be a lot more automation when it comes to just the CFP program," he said. "There's a great study from the CFP Board last year called 'Futureproofing Your Firm,' and they talk about how the work that that we as advisors do all day long in the financial planning process — information gathering, the analysis, the recommendations, the monitoring — all that is going to be automated and should be automated."

Altfest said with automation comes access. With more time to spare, advisors can now offer to everyone services usually available only to the wealthiest clients.

"It's going to be democratized. And I think we're seeing that already with the accessibility of estate planning help, or the accessibility of tax planning help, where there's been a huge advice gap," he said. "It's a great thing for advisors to provide more value, be more relevant, be more in the relationship. And it's a great thing for every client out there whose well-being is going to be increased and made better.

"I mean, if you're a business leader and you're looking at the next five years and you're not thinking about AI or how it's gonna transform your business … you're crazy."