Generative AI promises time savings, better client experience

The artificial intelligence boom in financial services did not come out of the blue. AI and similar technologies have made advisors more efficient for years now.

So what’s the difference? The “AI” you might have encountered over the past 10 years is completely different from the modern, generative AI tools fueled by large language models. We find that understanding the difference illuminates the possibilities this technology creates in the delivery of human financial advice across more areas of clients’ financial lives.

The state of play in 2024

Up to this point, wealth management technology has been used to help advisors with repeatable, algorithmic tasks. For example, financial planning software automates the creation of retirement plans by inputting client income, expenses, retirement goals, and using preset algorithms to generate projections on future retirement income, necessary savings targets, and potential shortfalls.

If you encountered “AI” before 2022 or so, it was probably a marketing term to describe this kind of rules-based, algorithmic technology. Generative AI is a very different animal.

In short, generative AI lets us automate the kind of challenging, non-deterministic work that would have been nearly impossible to automate otherwise. We currently see advisors deploying it in six major segments of their daily work:

1. Marketing + Content Creation: Drafting and reviewing newsletters, blogs, social media posts.

2. Segmentation + Lead Optimization: Next best action alerts, finding most likely leads to convert.

3. Compliance: Summarize regulations, scan public communications for compliance flags.

4. Notes + CRM: Summarize meeting notes, create follow up emails, auto-populate CRMs

5. Document Extraction: Extracts information from unstructured documents (like brokerage statements, estate documents) and provides analytics.

6. Analysis Assistant: Generates insights and answers questions about investments and client data.

Each of these use cases have several companies offering in-market solutions. The primary focus of the current batch of AI tools are saving time and reducing manual entry, significantly enhancing efficiency and accuracy in the advisory process.

Where we’re headed

The acceleration of AI technology creates a new set of consumer expectations and competitive dynamics.

While only 5% of consumers use AI to meet their financial advising needs, they already trust AI just as much as financial professionals on specific point-source questions (e.g. portfolio allocation). Just as people turn to webMD and now AI tools for medical questions before and after doctor visits, clients can (and will) fact check the financial advice they receive, and even turn to AI before their own advisor in many cases.

AI technology for advisors will allow advisors to focus on these differentiators. Over the next decade, Advisors using AI can win back free time to build trust and develop genuine relationships with more clients. The average lead advisor at an RIA works with 71 clients, according to kitces.com. As this technology matures, we’ll see more professionals maintaining books of 100+ clients with the same depth and personalization they were able to deliver to 50 people just a few years ago.

Where to begin

But where does that leave an advisor in 2024? Finding the right technology fit is a challenge in itself, regardless of whether AI is involved. Many AI tools lack an established track record. How do you differentiate between several vendors promising similar services?

1. Solve a need. Instead of looking for the neat new AI, actually solve a need. For example, if you spend a lot of time manually entering data from PDFs to spreadsheets, then you should find a solution that can automate that. It shouldn’t matter if it’s powered by AI or magic unicorns, just that it solves your problem.
2. Evaluate satisfaction. We think that the best measure to evaluate your AI tech stack is customer satisfaction. T3’s annual software survey and Kitces’ advisor tech directory are great starting points in your search. In our experience, the companies with the highest satisfaction are usually the ones that best listen to their customers and adapt to meet their changing needs. Additionally, since the field is so new and evolving quickly, betting on a company’s roadmap can be almost as important as its current product.
3. Evaluate security and privacy. A SOC2 type 2 audit should be something you look for with every technology vendor, and AI solution providers are no exception. If they cannot promise this level of security, look elsewhere.

Far from putting advisors out of work, generative AI will let advisors take their practice to higher levels. In the years to come, they will combine time savings and automated personalization in a way that allows advisors to focus on building strong client relationships, expanding the quality of services, and serving more clients than ever before.

Gabe Rissman is co-founder and president of YourStake.