Love or hate the technology, conversations involving artificial intelligence (AI) are interesting and needed and that’s particularly true of how this disruptive technology intersects with the wealth management industry.
Well-documented is the fact that proper intra-practice deployment of AI can stoke efficiencies, increase profitability and help advisors spend more time deploying the human touch toward other humans also known as clients.
Even with those positives, there are still lingering concerns about how AI potentially threatens advisor/client relationships. The fear is especially acute when it comes to younger investors. Consider some of the findings in a recent survey conducted by National Debt Relief.
“Around 7 in 10 (69%) millennials and more than 6 in 10 (64%) Gen Zers have used AI for advice about their financial challenges,” according to National Debt Relief. “65% of millennials and 53% of Gen Z would feel more comfortable discussing financial struggles with AI than the people closest to them.”
Advisors Need to Convey Their Value Propositions
Obviously, the quote above pertains to debt headwinds, but the point is that on a variety of financial fronts, younger people want to avoid perceived judgment and are highly comfortable talking to AI over a person when it comes to money matters.
That’s potentially worrisome to advisors because scores of previous research confirms that many clients hire advisors for very specific reasons (estate planning, retirement planning, long-term care, etc.) and if they believe that void can be filled by AI, they may be apt to eschew the advisor relationship.
“Across multiple studies, when we investigated what investors value in working with a financial advisor, we found three core advisor value benefits that emerge repeatedly,” notes Danielle Labotka of Morningstar. “To stay ahead of the curve of generative AI, advisors should redouble their efforts in providing these values to current clients and demonstrating them to prospective ones.”
Labotka points to three areas advisors can leverage to thwart the AI threat: Behavioral coaching, goals-based planning and reliable, customized advice. Those are tasks AI can’t yet accomplish and probably won’t ever be able to.
“Generative AI may approximate these core advisor value benefits, but it will ultimately fall short for investors,” says Labotka. “For example, although generative AI may match some of the behavioral coaching advisors provide—like acting as a sounding board for a client mulling over investment options—it cannot do all of it, such as proactively helping clients stay committed to their investing plans through rocky markets.”
Finding the Balance
Absolutely, advisors should be using AI for back-office tasks, record keeping, some forms of client communication and other basic tasks, but the trick is to not allow surpass your worth as an advisor.
“Moving forward, advisors must strike a delicate balance to bring generative AI into their practice without supplanting their value,” adds Labotka. “Advisors must weigh the value they get out of generative AI against the cost of using it. Aside from literal costs associated with using a generative AI tool, there are also more intangible costs associated with the loss of perceived value in working with an advisor.”
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