<img height="1" width="1" style="display:none;" alt="" src="https://dc.ads.linkedin.com/collect/?pid=289257&amp;fmt=gif">
Sign Up
Log In

Artificial Intelligence and Wealth Management: Vive la Revolution

Jeremi Karnell
Feb 1, 2017

Science fiction is filled with terrifying tales of technology run amok and artificial intelligence destroying the world as we know it. From the murderous habits of HAL in Stanley Kubrick's seminal 2001 to the artificial constructs created by our robotic overlords in The Matrix to every incarnation of The Terminator, novelists, short story writers and Hollywood producers have been busy warning us about the dangers of artificial intelligence and its profound implications on the future of our species.

At the same time, science fact has been forging away and moving beyond the fears that still plague science fiction fans everywhere. So far, instead of destroying life as we know it, artificial intelligence, or AI, has been improving our lives in countless ways.

A Silent Revolution

Many of those AI advances have been almost silent, and as a result, they have gone unnoticed by the general public. Many consumers do not fully understand the role artificial intelligence already plays in their everyday lives. They may appreciate the fact that their GPS app helps them steer around traffic jams, or that Google seems to know what they are searching for before they do. What they may not fully appreciate is that algorithms, artificial intelligence, and related technologies are working behind the scenes to make all these things possible.

Artificial intelligence is changing our lives in countless ways, from how we travel and get around to how we work and earn money. But what many financial planning and wealth management clients fail to realize is that AI is also changing the way we invest, and that is good news for both practice owners and their clients. 

An Ongoing Trend

In some ways, the move toward artificial intelligence and its new role in financial planning is an extension of trends that have been in place for quite some time. One of the earliest trends in the financial planning and wealth management industries started with the move away from costly full-service brokerage firms to online brokerages and their do-it-yourself approach to buying and selling stocks. That trend allowed financial planning and wealth management clients to save money while still achieving the investment results they needed.

The trend continued in the mutual fund industry, with a move away from actively managed stock and bond funds to passively managed investments that simply bought and held specific indexes. That same trend also manifested itself in the rise of exchange-traded funds, essentially funds that could be traded in real-time throughout the day. That trend also allowed financial industry professionals to work more effectively with their clients, helping them achieve their goals while lowering their investment costs even further.

The Move Toward Robo Advisors

The next move on the path toward artificial intelligence came in the form of so-called robo advisors. This robotic approach to investment success relied on a number of factors, including the age of the client, their income and when they wish to retire, to create customized plans that encompassed everything from recommended asset allocations to optimal withdrawal strategies in retirement.

Those robo advisors have been getting a great deal of attention, and many in the financial planning and wealth management industries have fully embraced them. Some financial advisors use robo advisors on their own to build client portfolios, conduct strategic rebalancing and point the way to retirement success. Others use robo advisors in conjunction with more traditional forms of investment. No matter what the approach, the move toward robo advisors has been an important guidepost on the road toward true artificial intelligence.

Artificial intelligence in the financial planning and wealth management industries may be somewhat new, but it is already making great strides and helping clients succeed. The automated advice that robo advisors provide is already playing an important role in the lives of financial professionals, and the emergence of more powerful artificial intelligence is expected to take things to the next level.

A Changing Landscape

The changes are expected to be profound, both for financial industry professionals and for the clients they serve. Artificial intelligence has the power to completely upend the financial services industry, and the practice owners who thrive under this approach will be the ones who took the time to prepare for those changes.

The practice owners who are able to survive and thrive in an AI world will be the ones who are able to provide added value to their clients, over and above the robo advice, their programs are able to give. By building a platform for the future, the owners of financial planning and wealth management practices can make the most of this artificial intelligence while still providing their clients with the personal advice and guidance they need. 

A Value-Added Approach to Investing

Artificial intelligence can boost the value-added approach to planning and investment that has always been a hallmark of the financial services industry. Recent studies have already shown that the use of a financial planner can boost returns and cut costs, and this should be even more true in the upcoming AI world.

Specifically, artificial intelligence promises to create a deeply personalized approach to financial planning, one that would be difficult or even impossible without that emerging technology. The use of artificial intelligence will allow future financial planners to create advice that is relevant to the needs of each client, further increasing the value of seeking professional financial guidance.

Greater Efficiency Through Modern Technology

The use of artificial intelligence can also automate processes that are time-consuming and expensive without the use of technology. Things like strategic rebalancing, market analysis, and tax loss harvesting should all become easier in an AI world, freeing financial planners, brokers and wealth managers from these tedious tasks and allowing them to allocate their personal resources in more productive ways.

The emergence of artificial intelligence on the financial planning scene should have a number of other benefits as well, especially for clients of firms that use the technology. Artificial intelligence has the potential to lower investment costs, improve results and even track financial habits.

Impress Your Clients

An AI algorithm could, for instance, assess the sufficiency of a new client's emergency fund, tracking transactions in real time, determining spending patterns and making recommendations. That relatively simple analysis could allow financial professionals to make smarter recommendations, servicing their clients more effectively and gaining their trust.

As time goes on and technology improves, the algorithms and programming underpinning artificial intelligence will only get better. Financial planning and wealth management firms are already embracing AI to improve service to their clients, lower the cost of doing business and move their firms forward. Far from being a source of fear and trepidation, artificial intelligence truly has the power to improve the financial world.

Subscribe by Email