AI: What it Means to Advisors Now

Jun 28, 2018


When you are trying to work out what will be the impact of a new technology, the conventional wisdom is that less will be in place than you think three years from now, and more will be in place in ten. I suspect that this is true about the way that AI will affect advisors.

This is the last of an arc of posts that Russ Kliman, SEI’s Head of Strategic Programs and Innovation and I have put together on AI. What is real about AI for advisors, and when we might see this technology impacting our practices and clients? We will also look at specific firms to see their differing approaches.

Should advisors worry about AI?

If you are worried that AI robots/software will take away the jobs of advisors, I assure you, they will not. Even with a ten-year horizon, the basic need for someone with money to be project managed and consulted on management of their money should be done better by a human. Even the most advanced thoughts of AI do not contemplate the consultative human engagement needed to guide a client’s behavior or address their feelings around how their finances will impact the life of their family and others. The technology can not address real-life scenarios such as a son who is not capable of managing money and the impact a solution will have on his self-image. Nor what is the fair and ethical approach of splitting money between siblings with different financial needs.

If we compare the rise of AI-enabled services with the robo-advisor trends of recent years, what we see is:

  • An emergence of robo-advisors who will adopt AI-based technology. These AI-based robo-advisors should increase the number of people who get better advice beyond algorithm-based risk assessment and passive ETF strategies, but they won’t take away from advisors who have a good value proposition today. Whereas previous generation robos focused on asset management algorithms, these new AI-advisors focus on how to sort your goals, prioritize them, and even make trade-offs. Some AI-enabled robos may even incorporate advice based on the monitoring of news and the global markets. This will be of value, initially, to young investors who are under-served with any advice, and will also be attractive to those who seek a digital-only engagement model.

PefinPefin – The world’s first AI financial advisor

One of the most prominent AI-enabled robo-advisors, Pefin recently brought its product to market and is a harbinger of the power of AI-only driven advice. When you go through the Pefin onboarding process, it feels similar to that of a robo – your goals and financial situation are captured. This progresses to a simulation of an advisor interacting with you to understand your goals. It is an interesting technique, and a start at emulating a human. The output is also different from a classic robo; Pefin is much more about guidance on your goals and running goal scenarios rather than what your portfolio should be. The current business model is that under $5,000 of assets is free and then you pay 25 basis points annually for the service.

  • An emergence of AI-enablement of current technologies. As the use of artificial intelligence continues to evolve, we see the use of AI language and features emerge into technologies we already use, such as CRM, portfolio management, client portals, or financial planning. Our tools should become smarter and begin to utilize concepts such as machine learning, or natural language processing to help advisors become more informed and provide better services to their clients. This will be the area which should impact advisors the most, current technologies made better through the implementation of AI-based approaches.
  • An emergence of new digital technologies that make their way from cool to mainstream. As AI continues to evolve, it will introduce new digital technologies that will initially seem too cool or advanced for advisors or their clients. Eventually that should be mainstream tech, such as AI-enabled chatbots. Today, they are found in larger financial institutions seeking service scale or smaller firms seeking to be early adopters, but the technology has many opportunities to enhance the client experience for advisors. Whereas today this technology may feel more like a gimmick for smaller firms, over time it should enable advisors to service clients any time, and more importantly service clients with reduced costs and greater scale. Ultimately, it’s not a replacement, but a supplement to the human advisor providing a better experience for your clients.
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When will AI services be available?

In our last post about AI, Russ looked at the different capabilities that AI is bringing to advisors. When will these services be available to advisors? The short answer is that all these capabilities are here today in some form. In a lot of cases, the firms are on the first version of their products, but the direction that AI is going to expand an advisor’s services is starting to come into focus.

Commentary from an AI startup

ForwardLaneTo find out more, Russ and I talked with Nathan Stevenson the CEO and Founder of ForwardLane. It’s a three-year-old AI company, focused on creating services for advisors. We asked Nathan what his company is providing to advisors in the near future. He highlighted:

  • A way of reviewing your clients’ holistic profile and accounts, so that the system provides highly personalized content or as he calls them, “stories” which could be shared with individual clients across a complete client base. Each client would feel that their story was unique, and the advisor would be provided with the reasoning behind the story. This should save advisors time by teeing up smart, personalized key talking points tailored to the client and also speeds meeting preparation.
  • A view of a client base and prioritizing the advisor’s schedule and work based on the most important events happening across all of the clients. The implications of this are large: you wouldn’t set meetings with your clients – you would be provided guidance on which clients to contact, and the reason for the outreach. This could reduce busy work.
  • A smart Q&A capability. The system will curate and construct information from research analysts, so that the advisor and their clients could ask questions, and get instant answers in a natural language conversation. It should feel like you had the best research analysts at your fingertips, constantly around for reference.

Nathan sees the key value of AI services as taking large amounts of complex information, and analyzing it so that new innovative services can be provided to an advisor’s clients, via the advisor.

He believes advisors are always going to be needed – time horizon, shifting interests, concerns and client fears are difficult for a machine to capture, contextualize and process – but with AI they can be smarter, more productive and gain new time to focus on fostering the client relationship.

In short Nathan sees that AI is a game-changer for the advice industry as a complement and enabler for human advisors. And so do we.

Given the breadth, scope and vibrancy of AI in financial planning, we think there will be more (human-written) posts about this topic in our future.

Pefin, Nathan Stevenson and ForwardLane are not affiliated with SEI or its subsidiaries.

Their opinions and views expressed herein are their own. SEI bears no responsibility for their accuracy.

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Raef Lee

Raef Lee

Raef Lee is the technology contributor for Practically Speaking and also serves as a managing director for the SEI Advisor Network.

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