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Advisors Beware the Super-Smart AI Wealth Machine

January 5, 2017

As self-serve investment platforms driven by algorithms, robo-advisors probably aren’t the threat to flesh-and-blood FAs that some observers figured they'd be, claims one commentator on WealthManagement.com. But as artificial intelligence permeates the investment advice world, advisors should beware the smarter versions of today's robo-advisors.

Already robos are exerting pressure on investment management fees and have put some big fund companies — Schwab, Vanguard and the like — in a position to take wealth- and retirement-management wallet share from megabanks and independent FAs alike.

Current convention says hybrid robos of human and online advisors working together — "fiborgs," FolioDynamix calls them — will rule the future of advice. In this view, old-school FAs can survive simply by tacking robo components onto their websites, much as banks installed ATMs in their foyers 30 years ago.

Financial planning and detailed portfolio analysis, says conventional wisdom, will further save the traditional practitioner, because machines can’t get to know clients well enough to customize plans for individuals or help them meet their goals. So FAs should de-emphasize fees on increasingly commoditized investment services and plant them firmly in the realm of planning and financial coaching.

But what if robos get smart enough to do an adequate job of financial planning? In an article called "Beyond Robos," WealthManagement.com examines developments in artificial intelligence that could put more pressure on advisors.

The online publication cites a study that predicts AI could eliminate five million job slots worldwide in the next five years. It refers to another report that says AI could replace a whopping 45% of all U.S. jobs by 2035 or so. And among the job categories in this firing line, experts tell WealthManagement.com, is that of the financial advisor.

It seems FAs concentrate on tasks — like market and trend analyses — that AI machines are really good at, and getting better.

It will help AI-oriented platforms of the future that there’s only so much genuine portfolio customization retail customers can afford. And it will also help that a lot of such economical broad-strokes customization boils down to a handful of either/or implementations — again, stuff at which these machines excel.


A company called RAGE Frameworks is looking to automate everything from portfolio management to rebalancing and goals monitoring, while at the same time utilizing artificial intelligence to track 100,000 news sources for information that could affect a portfolio's performance, writes WealthManagement.com.

The aim here “is to arm the advisor with a whole bunch of intelligent agents to do the 24/7 monitoring and deal with the information overload problem,” a RAGE Frameworks executive says.

Meanwhile robo-planning may still be “far off into the future,” as the publication says — but it’s on the way all the same.

On the plus side, vendors say such innovations will save advisors a lot of time and spare them a lot of drudgery.

But it’s also bound to eliminate headcount, and not just among support staff, according to industry watchers WealthMangement.com interviewed.

“It comes down to a small number of people that can do a lot of work using the internet, automation and AI,” one said. “The wealth that comes from that goes into fewer and fewer hands.”

By Thomas Coyle
  • To read the WealthManagement.com article cited in this story, click here.