What advisors and wealth firms should know about AI in 2025

It's been a little over two years since ChatGPT set off a gold rush into artificial intelligence, capturing the imaginations of investors and companies. And after spending that time getting to grips with generative AI, it's critical for firms to take a more strategic approach to adopting the technology.

That's what Alicia Rich, head of client and advisor digital enablement at Broadridge, said in a recent interview.

Rich noted that even before the ChatGPT-fueled AI boom, wealth enterprises had been using various applications of the technology, including robotic process automation and predictive analytics, to achieve back-office efficiencies and get insights from data.

"With the introduction of generative AI and more conversational AI, it allowed firms to start thinking of those other use cases of, 'How can I better train my internal teams? How can I better how can I make my content more consumable for an investor?' For an advisor, it was 'How do I streamline tasks?'" she told InvestmentNews.

Generative AI's strength lies in how it processes language, Rich said. That lends itself to the development of chatbots or copilots that can take commands, make summaries and translations, and offer recommendations or suggestions for various tasks.

"With RPA and other processes, your ROI was you could make things operationally more efficient and straight-through," she said. "Now you're getting into a space where you might not have the full ROI for productivity, but you're giving people a better experience. You're making advisors happier, you're taking away some manual tasks, and you're getting a higher internal ROI on how you're engaging with employees and making their days easier."

2024 saw several milestones in financial firms' continuing embrace of AI. In June, Morgan Stanley rolled out an AI note-taking solution that automatically generates client meeting summaries, which are then saved into Salesforce and can be emailed as necessary. Shortly after, JPMorgan unveiled an LLM suite to help employees in its asset and wealth management divisions with writing, idea generation, and problem-solving using spreadsheets, among other applications.

Outside the wirehouses, LPL announced a program in November to provide curated AI solutions for its advisors. Picking up on the trend, Advisor360 announced on Tuesday that it had acquired Parrot AI, a generative AI tech firm based in Boston, to add its recording, transcription, and meeting summary capabilities to the Advisor360 platform.

Rich has also been seeing similar moves in other less public and prominent firms, which put AI to work in similar use cases. But while early adopters sought to give their operations a boost, she said they're also proceeding cautiously with a hybrid approach.

"They don't yet fully trust some of these models, so they want to make sure that they're contained. They want to make sure that they have the right guardrails, that they've got the right control over them. So it takes time and resources internally from the enterprise to make sure that they've got that environment set up correctly," she said.

With both the SEC and Finra keeping watchful eyes on AI, Rich said firms must be careful and avoid going offside on regulations. Highlighting Reg BI, which requires broker-dealers to act in their retail clients' best interest, as a potential pitfall, she said documentation could prove to be one of the main compliance challenges with implementing AI.

Along those lines, a CFA Institute survey on generative AI last year found 70 percent of employers in the investment industry see a need for enhanced education on regulatory compliance and risk management.

"As I'm making a recommendation for a client I have to have their best interests at heart [as an advisor]. And at the end of the day, anything that comes out of one of these models that slightly looks like advice, it's going to go up against that," she said.  "Part of that regulation says that you have to document how you made your decision, and that's where the complexity comes in sometimes with the models."

As firms across the industry consider their plans for 2025, Rich said many might think putting the newest cutting-edge techology in the hands of advisors and the investors they serve is the best way to drive growth with technology. But she also said that at the most successful firms, those decisions to innovate are driven with a thoughtful technology strategy.

"It's really about [asking], 'What are the outcomes I want to drive for my business? Where do I need to invest to hit those core KPIs, and how am I building my talent around it?' ... It's not just about picking a piece of technology and plopping it into their stack," she said. "It truly is, from the top down, rethinking how they do business, and then implementing tools and practices that are going to enable them to do that."