Artificial intelligence mania has swept countless industries, including manufacturing, travel and retail, for its ability to automate workflows, reduce repetitive tasks and minimize human error. Now it has come for wealth management, too. NVIDIA’s fourth annual “State of AI in Financial Services” report shows that an overwhelming 91% of financial services companies are either assessing AI or already using it, mostly to improve communication or provide sentiment and market analysis.
Over time, technology has improved our ability to collect and analyze data on our clients, and AI is poised to take us even further. But there’s a danger of mismanagement and poor outcomes if all that data isn’t tied together well and one hand doesn’t know what the other is doing. Even if AI is the next frontier for advisors, they must take a holistic approach to client needs, not a siloed one. And the firms that can adapt to this process will win the race.
Taking A Page From Healthcare
Consider what happened in U.S. healthcare. In the late 1960s, Americans became enchanted with ancient wellness practices like Transcendental Meditation, yoga and the idea of returning to nature. Not long after, we ushered in the Information Age by introducing personal computers in the 1970s.
Yet healthcare, one of the oldest industries in the world, was for a few more decades grappling with a data problem: There was no way to systematically share information and coordinate care, and that led to poor outcomes for patients. Managed care company Kaiser Permanente witnessed this firsthand, and it would go on to be one of the first adopters of electronic health records (it rolled out its HealthConnect system from 2004 to 2010). This wholesale commitment ushered in an age of defragmenting healthcare practices and producing better outcomes for patients by allowing healthcare providers to examine all available data sources before making decisions.
Financial services needs to take a page from healthcare and learn the power of comprehensive or holistic services, specifically for financial planning and management — checking for client symptoms such as excessive spending habits or tapping into client dreams to connect the dots with their savings goals. Advisors need to have the full picture to produce the best outcomes for their clients.
Detecting Patterns Under the Surface
AI’s superpower is identifying patterns, but not all AI data is equal — it performs only as well as the ways it is nurtured and fed, meaning that humans running hundreds of thousands of prompts will affect the output quality. This makes having the right monitoring and validation processes in place vital to maintaining the integrity of AI tools and for their ongoing training.
One approach that could be helpful in this regard is “multiagents.” These are systems in which multiple independent AI agents work autonomously to answer questions more comprehensively and detect patterns under the surface, which allows for flexibility in their adaptation.
This could be a powerful tool for wealth managers trying to tackle their time constraints. A 2023 Kitces Report says advisors managing $1 million in revenue spend 39% of their workweek on front-office activities such as client meetings, prospecting and marketing. Multiagent AI could review advisors’ calendars to help them identify where they should spend time and with which clients.
Advisors curious about implementing AI should first look at how it can support more of their high-yield activities like client meetings and be honest about where they can delegate some of their hours to AI tools. They should evaluate a few different platforms and see which options integrate best with their other systems. As a starting point, they might consider testing with the notetaker tool and engage with more of their tech-forward clients to pilot the technology.
Putting the Right Guardrails in Place
Are there risks of multiagent AI? Yes. Many firms worried about compliance issues are concerned about trusting the agents with more sophisticated tasks, like portfolio building. Using this tech means keeping an eye on privacy, calibration and diligence. We must embrace AI’s transformative potential but with our eyes wide open. This will mean vetting and validating our models thoroughly before rolling out publicly and broadly, ensuring that both our brands and the consumers are adequately protected.
It’s clear that advisors cannot enter this space blindly, and clearing and custody firms can play a critical leadership role here. RIAs and broker-dealers will be able to audit as they go and use the various AI tools according to their needs. New technology might remove hours of manual analysis, but it will become irrelevant quickly if we don’t have confidence in its findings.
Conducting conversations with your trusted partners in clearing and custody is a smart way to understand how the broader industry has vetted current AI models, and where efficiencies can be found. Artificial intelligence is still nascent territory, but there is power in sharing best practices. Before rolling out any new AI technology, you’ll want to make sure you have guidelines in place for employees, as well as adequate training.
Humans Will Be An Advantage In AI’s Success
I recently heard in passing that these issues are not about humans vs. machines. Instead, it’s about humans vs. humans with machines. One thing is certain: AI may be the next frontier, but it won’t be the cure-all. Lightning will strike when the industry sees AI for its transformative power to streamline, identify patterns, and help us improve our human edge.
Summer Fischer-Tom is a senior vice president and head of product development at Axos Securities.
