AI is Changing Wealth Management. But Maybe Not Fast Enough

Nearly all advisors believe AI is transforming how advice is created and delivered to clients – although experts say wealth management is years behind other industries in its use of machine learning.

Gianluca Colla/Bloomberg

Gianluca Colla/Bloomberg

The vast majority (98 percent) of financial advisors say their firms have taken steps to implement AI strategies – including proof of concepts, deploying artificial intelligence within targeted business units, and scaling it across the entire organization – yet many advisors also believe that their firms’ AI tools and insights are too complicated to use, according to a new survey by Accenture.

Accenture has conducted and published research on AI perception and use within wealth management for several years. In December 2020, the company published a survey of 100 wealth management executives and found that 84 percent of the executives said AI will “fundamentally transform the wealth management industry over the next five years,” yet 85 percent also said AI’s impact is “more hype than reality for businesses today.” Of those surveyed in 2020, 60 percent said they already used artificial intelligence and 28 percent were scaling or expanding its use.

Eighteen months later, 83 percent of advisors believe AI will have a direct, measurable, and consistent impact on the client-advisor relationship by early 2024, and the same percentage believe that within that same period, AI will be able to achieve “a level of sophisticated advice and planning that will ultimately leave [financial advisors] competing with an algorithm for clients.”

Independent RIAs made up 16 percent of survey respondents with the largest portion (43 percent) coming from advisors at bank brokerages. Scott Reddel, managing director of wealth management at Accenture and one of the lead researchers in this survey, says he was surprised at advisors’ “extreme” level of positive response to AI compared to previous years. He believes the reasons for this are twofold.

“Firms are making AI a priority, so advisors are hearing more about it and being pushed different things. In addition, the industry and advisors have gotten smarter and better at rationalizing the expectations of what AI will do,” Reddel says.

Most wealth management firms using AI technology are targeting “low-hanging fruit” that helps advisors deliver a certain piece of advice or product that helps advisors perform their job better or more efficiently, Reddel says.

There are many examples of this type of technology being deployed, from prospecting tools that use machine learning and publicly available market data to help advisors hyper-personalize their outreach to financial planning software that helps advisors analyze estate and tax data. Bento Engine, a fintech company that mines CRM data and automatically alerts advisors when it finds potential advice opportunities for their clients, recently raised $1.1 million in seed funding.

Advisors want AI tools that make them more time efficient and improve the perception their clients have of them.

Of those surveyed, 87 percent of advisors want to use more AI tools day-to-day, and more than 80 percent believe that AI-powered notifications of client life events in real-time would be one of its clearest and measurable benefits. Eight out of 10 advisors also prefer to use AI tools to automate time-consuming manual tasks and believe AI’s greatest benefit is translating clients’ data into actionable insights.

Still, there are challenges to integrating AI into wealth management systems.

“There’s a lot of different pilots of different use cases, so it becomes hard for an advisor to figure out what’s really useful or where they’re getting the value. That creates a lot of churn in adoption,” Reddel says.

Doug Fritz, founder and CEO of F2 Strategy, a technology consultant to wealth management firms, says that true AI technology is almost non-existent in wealth management and that most of what advisors want and what firms term “AI” is just automation.

“Artificial intelligence are tools that can look at trends, and then propose specific actions items in the future,” Fritz said. “If Excel can do it, it’s probably not artificial.”

Both Fritz and Reddel agree that wealth management is far behind other industries in implementing the technology.

A 2021 Accenture global survey of 1,176 firms across 16 industries on their use of AI technology and its maturity saw financial services come in dead last. (According to the research, AI maturity is the degree to which organizations outperform their peers in a combination of AI-related foundational and differentiating capabilities.)

According to Accenture’s most recent survey, many advisors at firms that are investing in some form of AI technology or automation are struggling with how their firms implement it – with many reporting that insights generated by AI are too complicated to use and not as impactful as they’d hoped. More than 60 percent of advisors believe their firm is taking on too many AI pilots in its push to adopt the technology. (Nearly half believe that their firm’s culture is the biggest impediment to adopting AI.)

Firms developing AI technology should focus on seeing a single use case or program through to the end, ensure the firm’s priorities align with where advisors find high value and provide managerial support to ensure the success of the AI program, according to the report.

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