The AI invasion has begun, and we are not ready

For decades, humans have fantasized about the day machines take over and give mankind their comeuppance (just behind those pesky Martians). Sentient technology has not yet arrived to conquer us, but Moore’s Law is in full effect, and machinery has surpassed humankind in its ability to process information and data. Now, thanks to machine learning, computers can evaluate alternative scenarios beyond our capabilities. What does it mean for wealth management, and how should we mortals use what’s coming to help us improve the world, rather than concede defeat to it?

We all know the doomsday scenario for our industry: computers replace humans by delivering superior planning and investment advice at a fraction of the cost. We all remember the robo-advisor fears that gripped wealth management 10 years ago. And just as then, the realities around the proliferation of AI will be much more nuanced.

Don’t expect a binary outcome. Life is seldom purely good or bad but gradations between the two. However, there’s no question that AI will accelerate many of the changes that are inevitable in the evolution of our industry and be a catalyst for those that win or lose in the future. Most of the short-term innovations will likely revolve around machine learning’s ability to provide superior, more immediate analysis and scenario evaluations, far more quickly than humans are able to create today. Keeping that in mind, here are the three most likely near-term applications of AI for our clients and for our firms:

1. Competitive comparison shopping. Radically improved analysis and recommendations, combined with increased transparency and pricing pressure, are the first and most important impact of AI. Today, prospective clients might ask a friend, or Google your firm, to learn about you. But AI will soon provide an external assessment of your firm’s quality and advice. Imagine a client asking ChatGPT about you and seeing a comparison between your firm and competitors, easily grabbing digestible data from social media, your ADV, and all public records. They may compare pricing and services rendered and view client ratings, both the good and the bad, similar to Amazon. Expect pricing pressure and increased visibility for all.

What to do: Regularly search data about you and your firm, ensuring you know what clients see about you. Do the same for your competitors. Ensure you have a compelling brand message. Understand where your services are behind the market and how your pricing compares. Be ahead of your prospective clients when it comes to your reputation, and ensure your services are described thoroughly and compellingly wherever you have a digital footprint.

2. Surge in advisor productivity and firm scalability. As technology picks up more of the quantitative work and completes the planning and investment analysis at a scale and proficiency humans can’t match, the advisor will serve more of an audit and review function. After all, humans have judgment and technology doesn’t. Think of the role technology and analytics has had in sports. More information and data allowed the more agile early-adopter teams to be more effective and win more. Today, all teams use analytics combined with their judgment and experience to make better decisions.

In wealth management, that means winning advisors will focus on two key, uniquely human elements: our empathy and our ability to read between the lines. Nuance is lost on a computer, but better data can help us make better decisions. There are no feelings or messy internal conflicts in the theoretical binary world of technology. However, you must use the power of technology (and the way AI is evolving it) to keep focusing on the work for a more personal client experience.

What to do: All software will be going through major evolutions, both in existing tech stacks and the new solutions down the road. Be agile and flexible on the technology you use to serve clients without compromising the north star of improving their financial lives. If you do not embrace nascent technologies, you will not be able to scale your advisors’ productivity, limiting how you compete on the expansion and breadth of services or on price. Instead, you may find yourself stuck in the “messy middle.”

3. Deeper, more insightful and proactive advice for clients. We are paid to understand our clients and help them make good financial decisions. Among the most exciting evolutions will be our ability to use data to anticipate our clients’ next most likely financial challenges and mitigate the negative impacts of bad decision-making. Imagine being notified that your 58-year-old client, whose last child is off to college, is likely thinking of buying a second home or going back to school herself? These kinds of insights are already being used to some degree by many search engines and social media to target you with ads you are more likely to be interested in. Ever notice how you’ll see an ad or an article that eerily connects to something you’ve recently been thinking about? Well, that type of insight will be there for prospecting clients with money in motion, as well as to help you provide better advice to existing clients.

What to do: First and foremost, AI is dependent on rich data. Collect as much information as possible about your clients, including major life events, and log them into your CRM. Capture psychographic data so your advice adjusts for the differences between your clients. The more you know, the more you will be able to help. Over time, technology vendors will develop more client information for your use. However, having your own secure and unique data will give you a competitive edge and help you serve your clients better than anyone else.

The world will not end for human wealth advisors when AI comes to town, but if you want to compete in the brave new world, you will surely need to use the technology as an ally. Great advisors will become even more human, using technology to ensure their advice is more relevant and impactful in people’s lives than ever. Hopefully those Martians will leave us alone in the meantime!

Joe Duran is managing partner at Rise Growth Partners, the ultimate growth partner for exceptional advisory firms.