Investment advising in the AI era

When wealth advisers and clients meet these days, it’s likely an AI tool will join in some capacity. As seems true of every industry right now, artificial intelligence is transforming wealth management and, by virtue, the adviser-client relationship.

It might be tempting to predict — as some analysts have — that AI could put advisers out of work. But the reality is that advisers and clients both are already relying on these tools, and doomsday predictions have yet to come true.

Rather, most Americans say they continue to trust human advisers to manage their money over AI tools alone, according to a recent survey by Northwestern Mutual. And AI may actually improve the advising experience, as these tools could help advisers offer more holistic advice or democratize access to financial advice to a broader swath of the population, according to a report by the World Economic Forum.

Virginia financial advisers agree that AI tools are more likely to benefit the industry than pose a threat. Both Trovato and Smith readily recall meetings with current or prospective clients who mentioned they’d first consulted AI for specific financial questions.

“I think that’s wonderful,” Trovato says, adding that some prospective clients may feel more confident about hiring a human adviser if they feel they have an objective baseline to compare recommendations.

Though the tools are relatively new, AI is the natural next step for clients who came to meetings in the past asking questions about something they read online. “AI has taken that to a completely different level,” Smith says.

Acknowledging that AI is a resource that clients are likely to consult for research creates a “great opportunity” for advisers to shine by offering their own expertise on specific investments, Smith says. “If you don’t understand what you have and why you have it and how it’s going to respond in different markets, then all you’re left with is emotions.”

In turn, advisers also are embracing AI in their offices, finding it can free them up from rote tasks like note-taking during client meetings so they can be fully engaged and focus on providing more personalized and higher-value advice. And everyone benefits if advisers can deepen their relationships with clients.

Since Merrill launched its AI-enabled data analytics tool Client Insights in 2020, for example, its financial advisers have identified 40 million-plus different insights spanning tax efficiency, retirement planning and banking needs that they’ve been able to proactively share with clients, according to data provided by the firm.

AI can help advisers accomplish tasks that would be onerous if done manually or create efficiencies. Bernert has found one of the most useful applications of ChatGPT is making sense of the trove of research distributed by the major Wall Street firms by identifying common trends and outliers that may be useful for identifying potential investment opportunities. Using anonymous client information, these tools can also be used to automate the math required to rebalance portfolios, he adds.

“If you prompt well, you can get some pretty cool stuff out of it.”

Incorporating AI into their day-to-day work now is akin to the early days of adopting personal computers or the internet, Montgomery says, which is why advisers are wise to embrace this technology. For example, there are practical applications for AI in advising family offices with multiple portfolios as these tools will be able to more efficiently identify how various portfolios intersect, he adds.

“I view it as a positive leverage of time, and I always think that’s a good thing,” Montgomery says.
Because they see firsthand how AI can augment their services, these advisers say it’s crucial for the industry to evolve and keep pace with technological advancements.

And there’s really no reason to fear that bots are coming to replace them, so long as advisers stay focused on what they do best: understanding the needs of their clients and comforting them when financial markets or life circumstances cause angst.

“That emotional element, from my perspective, will never be replaced,” Smith says. Adds Trovato: “AI is definitely not a replacement for good financial advice.”