Generative AI is notoriously bad at hands – that is, creating images of people with digits that don’t resemble octopi. But in terms of giving financial advisors a hand – well, that’s another matter.
Wealth professionals have been turning to the technology almost as fast as it has been evolving. Currently, 85 percent of advisors say generative AI can help them in their practices, up from 64 percent who said so last year, according to results of a survey published today by Advisor360.
Most advisors – 91 percent – said they already use it to some extent. The leading applications for it: predictive analytics, or expectations for client behavior; marketing; and summarizing meeting notes, the company found in its survey of 300 financial advisors during the fourth quarter of 2024.
And AI is no longer being used just to help with mundane tasks. Twenty-nine percent of advisors said they are using generative AI to develop personalized financial plans. Over the past year, firms have widely updated their policies to account for generative AI, with 82 percent now addressing it, up from 47 percent in the prior survey.
“We know that many CFP professionals use it when they’re engaging in client meetings, analyzing client documents, conducting initial research, and in many other ways,” said Leo Rydzewski, general counsel at the CFP Board. Generative AI has helped advisors become more efficient in administrative duties, and consequently, “they can spend more of their time deepening relationships with the client,” he said.
Today, the CFP Board issued an ethics guide and checklist specifically for generative AI. With all the potential benefits of using it come risks.
Foremost is client data confidentiality being compromised, said Sara Cortes, assistant general counsel at the organization.
“That was something we really wanted to emphasize,” Cortes said, pointing to the pressing need for firms make their technology secure.
The board’s guidance is a companion to the more in-depth technology guide and questionnaire it published last year to help firms ensure they comply with laws and company policies and act in the best interest of clients.
The new piece adds a note that will be obvious to anyone who has spent much time using generative AI – it is imperfect. The technology of course can’t replace human judgment, and it can spit out results that are wildly inaccurate, a phenomenon called “hallucination.”
For anyone, dabbler to super user, it is imperative to check the results.
“You remain accountable for the output,” Cortes said. “Just like how financial advisors currently use technology to help with their portfolio allocation … they need to be aware of the assumptions and limitations and remember that at the end, they are the ones responsible for that work.”
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