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The Artificially Intelligent Wealth Advisor

Recently, William Trout, Senior Analyst at Celent, presented a webinar on the evolution of artificial intelligence (AI) in wealth management and whether or not its full maturation, predated by that of robo platforms, will spell doom for human advisors or in fact strengthen the delivery and scalability of service, thereby enhancing the overall client experience. Indeed the notion of AI resonates, as the general topic of technological integration to improve efficiency and transparency is one of utmost prominence within the industry these days. Here are five points of saliency pulled directly from Will’s incredibly fascinating presentation.

  • Three levels of AI: The development of intelligence technology has come in the form of three levels or rather stages: machine learning, deep learning, and artificial general intelligence. Machine learning is by far the most common and widely understood of the three, as it involves the existence of “computational firepower and the ability to recognize context and make deductions.” This type of AI has been present within high frequency trading for some time. Deep learning entails “overlapping neural networks in order to draw and learn from data similarly to that of a human brain.” IBM’s Watson comes to mind. Finally, and perhaps most ominously to some prognosticators, resides artificial general intelligence, which displays the consciousness and sentiment of an actual human being. While this highest level of AI exists, Trout believes we are still quite distant from the manifestation of John and Sarah Connor’s worst nightmare.
  • Three areas of opportunity: Delivery capacitation will streamline processes and improve efficiency by automating learning and client meeting prep. Investment allocation will allow firms, especially asset managers, to take what Trout calls a “house view” and proactively capitalize on market patterns, delivering stronger, more consistent returns for investors. Lastly, AI will help firms and their advisors lower risk and meet compliance by running suitability and fraud checks.
  • AI as a complementary not independent agent: While portentous individuals tend to see the evolution of AI as the long farewell to traditional advisors, it is more likely that such advanced analytical platforms will enhance the capabilities of humans, reducing the cognitive burden of information overload. AI will complement, not replace, the human to human experience by automating the discovery of knowledge, thus bolstering an advisor’s investment insights and adding value to the relationship. AI’s aggregation of endless information will help complete a person’s sphere of knowledge, supplying him or her with known unknowns and unknown unknowns. This amplification of intelligence should only enhance the client experience, benefiting one’s financial goals over the long term.
  • Robo’s endpoint: The functional capabilities of robo are essentially reaching their apex, as the technology is reliant on data inputs for investment allocation and doesn’t come close to AI’s predictive power nor a human advisor’s level of personal, emotionally discernable service. As AI transcends the robo horizon and empowers traditional advisors by eliminating manual tasks and furnishing a vast supply of instantly accessible knowledge, the doomsday robo scenario will fade from view. Ironically, the evolution of technology within wealth management isn’t exclusively advancing robo platforms, as was once speculated; it’s reinventing and reinvigorating human advisors.
  • A broader transformation is at play: The utilization of AI is not occurring within a vacuum. Rather, the technology is part of a larger transition, one that involves wealth management moving from a transactional business to one primarily driven by relationships. Advisors will continue to execute processes, but collaboration is certain to be more prevalent and paramount than ever. There are five factors propelling this transformation: regulation tailwinds; the C-suite looking to integrate tech solutions; advisors wanting simpler tools; investor skepticism and demand; and investor preference for real-time knowledge.

Will is speaking on this very topic at an invitation-only roundtable on December 8 in London. The event is entitled “Vision 2020: Digital Wealth & Asset Management,” and by the looks of the program, the day should be undoubtedly advantageous for those in attendance.