Welcome to Financial Advisor IQ

Traditional FAs Shouldn’t Fear AI

December 18, 2017

Traditional wealth managers are convinced the advent of robo-advisors and artificial intelligence threatens the jobs of financial services professionals, Wendy Spires writes on WealthBriefing. But the reality is that the high-touch business of financial advice stands to benefit from AI, as do its traditional practitioners, she writes.

Fifty-seven percent of wealth managers polled for a recent report on technology and wealth management authored by Spires believe AI poses a threat to financial services professionals. But while digital upstarts in banking pulled off launching their businesses with just 10% of the staff of traditional firms, the same doesn’t apply to wealth management, according to Spires, head of research at ClearView Financial Media.

Financial advice is complex and requires multidisciplinary knowledge that needs a personal touch, she writes. The panelists consulted for Spires’ report say traditional wealth managers should embrace AI for its ability to make their work far more productive.

For example, while 71% of wealth managers believe financial advice clients are prepared to accept advice from robo-advisors, the reality is different, she writes. Self-directed investing, for example, dropped from 45% in 2010 to 38% in 2016 — during a time when the number of robos and the services they offer expanded significantly, according to Spires.

Reportedly, there are psychological barriers to investing substantial amounts of money merely with technology, so investors resorting to tech tools use them for assessments — and then head to a human professional for investment management, she writes. And that’s because it’s precisely the human element that’s responsible for the bulk of the value in wealth management, according to Spires.

Meanwhile, AI can help advisors process the increasing array of information about clients gathered from institutional data and client meetings, Greg Davies, head of behavioral science at Oxford Risk, tells Spires.

“AI can dynamically process that information in real time and do all the data juggling to present the advisor with the most accurate, holistic portrait the firm has of the client at that moment,” he says.

AI can also help advisors pinpoint the right issues to bring up with clients during their meetings, according to Spires. In addition, it can help advisors stay on top of regulatory requirements, she writes.


And while wealth managers are concerned about AI, most firms are already aware it can be integrated into their practice. Fifty-four percent of wealth managers surveyed for Spires’ report say their firms are already investing in AI applications and 23% says their companies are looking into it, while just 23% say their firms aren’t interested.

By Alex Padalka
  • To read the Wealth Briefing article cited in this story, click here.