Artificial Intelligence (AI) is a much-bandied about term by both product vendors and reporters. The former is trying to sell you on their product, the latter uses the topic to increase readership. It often works because advisors are insecure about the term. Generally speaking, we fear AI; we’re not sure what it means exactly, but we’re pretty sure it will replace us some day.
Today we start a three-part blog series that is intended to dispel these fears and shed some light on the topic.
Do you know the significance of the year 2045? That is the year that some scientists foresee that our technological creations will exceed the computing power of human brains. This is called technological singularity or singularity for short. Ric Edelman, the founder of Edelman Financial Services has worked with the Singularity University and used the research to describe how AI may affect the future, and how it affects an advisors’ practice specifically.
So, if one of the very largest Registered Investment Advisors in the US is motivated by these concepts, it is maybe a good idea to find out more about AI. My partner in these posts is Russ Kliman – Head of Strategic Programs & Innovation – who has immersed himself in the topic. Over to you, Russ.
With the likes of companies such as Google touting “AI-first,” it’s no wonder AI has gained so much press and has become the go-to buzzword for software vendors seeking your attention. But what does AI really mean? And more importantly, what does it mean for your firm, your clients, and the differentiating value you provide?
From a definition standpoint, artificial intelligence is the ability of a machine to perform tasks commonly associated with intelligent beings, such as the ability to reason, discover meaning, generalize, or learn from past experience. But the term artificial intelligence is not the only buzzword that’s gained in popularity. Terms such as machine learning, natural language processing, predictive analytics, and many more are everywhere. While each of these terms have specific applications and meaning, the key take-away is that they all fall under the broader umbrella term of ‘artificial intelligence’.
So why have all of these terms become so popular in recent years? Their popularity is a convergence of two key factors:
1) The emergence of computing power, access to both structured data (i.e. CRM, account aggregation, performance data) and unstructured data (earnings calls, analyst reports, market commentaries), and specific mathematical algorithms.
2) Human limitations which impact the ability to consume vast amounts of information and derive meaning from it, as well as the need to make fast decisions.
It’s the convergence of these two tailwinds that have created the emergence of AI-enabled technologies across all industries, including financial services.AI: Sifting through the hype Click To Tweet
So what can AI actually do?
It can transform relationships between human and machines, allowing people to spend more time on exceptional work; the 20% of their time on tasks that can drive 80% of the value creation. At the same time, AI can also automate many of the routine tasks, bringing intelligent automation to refine and optimize business processes. And lastly, it can unlock the trapped value of data to help discover new trends and develop deeper insights. However, it needs data, a lot of data that is high quality and feature rich. Without the data, AI cannot work – data is to AI as electricity is to the light bulb!
AI can answer key business questions that impact every industry, and every role. If you need answers to any of these business questions, this is where AI can drive business value.
Is AI real or is just hype?
While the press and many software vendors are taking advantage of the buzz surrounding AI, you should know that it’s already impacting many industries, from hospitals and banks, to shopping and social media – AI is everywhere, and you may not even realize it.
“Much of what we do with machine learning happens beneath the surface. Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more. Though less visible, much of the impact of AI/machine learning will be of this type — quietly but meaningfully improving core operations,” Jeff Bezos, founder Amazon. This quote shows the impact of AI beyond what we can see, such as chatbots or Siri, and how AI can impact the core operations and scale of business.
In the past few years, much of the financial service industry was completely consumed by the emergence of the robo-advisor. And while no one would argue the disruptive affect robo-advisors had, their actual impact was expected to be small – forecasted at 10% of the global wealth market. However, financial services industry analysts forecast AI can transform not only the remaining 90%, but all of the market.
In our next blog post, we will explore where AI should impact the financial services market and how that impact might materialize.
Jeff Bezos and Amazon are not affiliated with SEI and its subsidiaries.