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How AI in Wealth Management Could Lead to Job Cuts

By Garrett Keyes April 27, 2018

Artificial intelligence may grow an advisor’s capabilities across portfolio management, administrative, and compliance functions, but some fear improved technology could put financial advice jobs on the line as it has in automotive and other industries.

The development of AI and automation technologies excites financial advisors. Many see the new technologies as a means of increasing practice efficiency. Showing the width of improvement AI and automation can present to businesses Pieter Nel, an artificial intelligence and digital strategy expert at McKinsey & Company, says “30% of tasks in 60% of occupations” can and will be automated over the next number of years, including in the advisory industry.

But determining where, and if, automation will cut staffing jobs in advice firms is a difficult task. Sources point to administrative, compliance, and portfolio management functions as the likely focal points of change.

Administrative functions are set to change as simple tasks done by humans, like data entry, will be handled through AI, Nel says. Steve Cassaday, president and CEO of Cassaday & Company, says rather than “recreating [client] letters from scratch,” his firm would use programs capable of automatically customizing each client letter, saving time.

Cassaday & Company, which has $2.7 billion under management, is also looking at AI and automation regarding its CRM system. Relying on AI in administrative tasks lets Cassaday “set up workflows and [manage] tasks” at a higher efficiency, ensuring “the process is airtight and [nothing] falls off the conveyer belt.”

Applying AI and automation to administrative needs eliminates time-consuming low-skill tasks. As an example, Michael Silver of Baron Silver Stevens Financial Advisors, says he used to dictate notes into a cassette player, from which an employee transferred them into his CRM system. By using AI technology, the recording is automatically turned into text in the CRM and “takes zero people,” saving the firm time and money.

Innovation in administrative functions will also reduce the number of staffers needed to complete simple tasks. Specifically, through a process Nel calls ‘robotic process automation,’ advisors can use software to “replace administrative tasks humans are doing,” directly affecting admin staffing needs. Silver, whose firm manages $560m, agrees that AI and automation will let technology complete menial work previously done by people.

Changes in administrative functions will also transfer to compliance departments. Roy Singh, executive vice president of Bain and Company, says compliance is a space with a lot of potential for automation. He points to compliance data collection as particularly due to change as AI becomes more integrated.

Instead of advisors reaching out to obtain compliance information over the phone, through email, or in letters, they will use software acting as an interactive agent, or ‘chatbot,’ to automatically gather missing information, he says. While crafting one communication without assistance from AI is not an overly time-consuming process, writing several can occupy an abundance of time. Automating the process can “save a lot of costs” and time.

AI and automation can also be used to make client and firm taxes easier, Silver says. Instead of calculating and updating tax figures for each client, advisors will “immediately know the tax picture from [client’s] investments” at the “click of a button” through automatic updates.

Another use for AI within compliance is organizing regulatory filings, Singh says. Advisors are required to keep records of all transactions in investment portfolios for regulatory purposes. At least part of that process can be automated, he says. Jordan Waxman, managing partner of HSW Advisors, agrees filings should be done “in a much more automated way” and says FAs have already begun using AI in compliance departments to sort and store documents.

In line with increased AI and automation implementation in compliance is the potential for staff reductions. But Singh says compliance staff reductions will focus on non-complex roles and are not likely to be widespread. The number of staff needed to complete “the more mundane 'filling out forms' aspects” of compliance work may decrease as AI becomes capable of handling simple tasks, but complicated work still requires a human presence.

As an example, he says advisors are unlikely to solely rely on AI for tax filings with incorrect completion penalties. When it comes down to “more complex multi-faceted decisions,” people are hesitant to wholeheartedly rely on technology.

The lack of trust in AI to handle important decisionmaking translates to portfolio management aspects of FAs duties as well, Silver says. AI will help to “automate the investment management side” of advisor’s duties as an additional tool, but will not replace people.

AI and automation will reveal more ways to create portfolios that quickly “learn from markets and investor behaviors,” says Waxman, whose firm manages $2.5 billion. AI will also enhance FAs' abilities to calculate expected return rates and conduct a statistical modeling technique known as Monte Carlo analysis, predicting movements in asset prices.


Instead of replacing advisor portfolio management jobs, AI will give FAs the support and freedom to focus on other aspects of business, Silver says. FAs will turn their attention to areas such as “the planning side of things, estate planning, and taxes,” rather than producing returns stronger than “the person down the street.”

Despite capabilities Cassaday describes as “impressive,” he believes AI won’t outweigh the importance of advisor and client personal relationships. He says there is an “emotional and relationship component” to the advisement relationships FAs have with their clients that will prevent them from being replaced by technology.

Across all industries, Nel says AI and automation will grow in prevalence and “people who are slower to adopt new technologies [tend to] fall behind.” But FAs say significant decreases in advisement staffing are unlikely to occur, with staffers tasked with non-complex functions being the primary party on the cutting board.

Staff working in the back office of advisory firms “doing something repetitive that doesn’t change day to day should try to retrain” or face being automated out, Singh says. Staffers working in more complicated functions across administrative, compliance, and portfolio management, however, are unlikely to see cuts in staffing now.