Leveraging AI for Financial Advisors

Few technological innovations have disrupted industries as rapidly as artificial intelligence (AI). AI has already transformed how many companies do business by streamlining operations and enhancing decision-making.

This year, 77% of companies are using AI, and 83% say implementing AI is a top priority. As such, economic experts forecast that AI will contribute a whopping $15.7 trillion to the global economy by 2030.

While AI is a hot topic, we’ve most likely only scratched the surface of this paradigm-shifting technology. So, how is AI being used in the finance industry, and how can financial advisors use it to their advantage?

In this article, we’ll explore the current sentiments surrounding AI and outline seven steps for implementing it as a financial advisor.

What is Artificial Intelligence?

AI is the ability of machines or computer systems to perform tasks that typically require human intelligence, such as:

• Learning
• Understanding written and spoken language
• Recognizing patterns
• Solving problems
• Making decisions
• Interpreting images and videos
• Generating new content
• Optimizing processes

While the earliest AI programs were developed in the 1950s, recent advancements in machine learning and natural language processing have dramatically enhanced AI’s capabilities, making it more powerful and versatile than ever before.

AI Sentiment Among Financial Advisors in 2024

Since AI is so powerful, ignoring it is no longer an option if you want to remain competitive. However, not all financial advisors feel the same about its widespread adoption.

Accenture surveyed 500 financial advisors across North America to assess their attitudes about adopting AI in 2024. Here are a few of the survey’s key findings:

• 97% of financial advisors believe that AI can help grow their book of business by more than 20%.
• 92% of financial advisors have already taken steps to implement AI.
• 83% of financial advisors believe AI will directly and significantly impact their client relationships over the next 18 months.
• 80% of financial advisors plan to use AI to automate time-consuming tasks.
• 79% of C-suite wealth management executives say their businesses are “digitally ready” to adopt AI.
• 55% of financial advisors believe that AI will revolutionize the future of financial advice by 2027.

7 Powerful Applications of AI For Financial Advisors

Now that we’ve reviewed the current AI landscape, let’s take a look at seven of its key applications in financial advising:

#1 Meeting Transcription and Note-Taking

On average, financial advisors spend 11 hours per week on administrative tasks. AI can considerably reduce this time by automating various activities, including meeting transcription and note-taking.

Taking detailed notes during meetings is essential, as they can guide your investment strategy and support your regulatory compliance. However, jotting down notes can be challenging while you’re trying to listen to what your clients have to say.

The majority of clients claim that the “ability to listen and understand their goals” is one of the top characteristics they look for in a financial advisor. As a result, you don’t want to multitask during your consultations. Fortunately, AI eliminates the need to do so.

AI can transcribe client consultations in real time using speech recognition technology and generate accurate meeting records. With AI handling this tedious task, you can focus solely on listening to your clients and showcasing your expertise.

#2 Automated Document Management

Your operational efficiency and regulatory compliance depend on your ability to maintain accurate, organized records. Manual document management, like note-taking, can exacerbate your administrative burdens.

Luckily, AI can streamline document management in several ways. Using optical character recognition (OCR) technology, AI can transform scanned documents into searchable digital files. From there, it can analyze documents’ content and categorize them accordingly, making them easy to locate later on.

Additionally, AI can store your documents securely, track their version histories, and archive outdated files automatically. This can enhance compliance by ensuring all records are accurate, up-to-date, and easily retrievable.

#3 Automating Client Communication

Clients who sign up with you want to know you’re always there for them. Regular communication can build trust and reassure clients that you’re actively managing their investments.

While consistent communication is important, it can also be time-consuming. AI can lend a helping hand by automating the following types of emails:

• Meeting summaries – After wrapping up a meeting, you can instill confidence in your clients by emailing them an overview of your conversation, goals, and next steps. AI can draft these emails for you using your AI-captured meeting transcripts.
• Follow-ups – Not every person you schedule an initial consultation with will be ready to sign up on the spot. Rather than letting these leads slip away, you can nurture them into signed clients with well-timed follow-ups. AI can help you draft, schedule, and send these follow-up emails to increase the chances of securing their business.
• Reminders – Clients appreciate timely reminders about upcoming appointments, tax deadlines, and insurance policy renewals. AI can send these reminders at the right times and personalize them for each recipient.

#4 Enhancing Your Marketing Segmentation

Even if you already have a healthy client base, you may want to grow your business over time. Financial advisor marketing can help you do just that.

AI has become a vital marketing tool in recent years. In fact, AI has been shown to boost financial advisors’ lead generation by as much as 50%. It can support your marketing efforts by:

• Segmenting your target audience – Marketing campaigns are more effective when highly targeted. AI can analyze your client data and segment your client base, ensuring you promote the right services to clients at the right times.
• Employing automatic personalization – Personalized marketing has been shown to produce higher rates of engagement, conversions, and revenue growth than generic messaging. Millennials and Gen Z, in particular, are accustomed to tailored content and personalized service recommendations. By analyzing your clients’ preferences and investment history, AI can easily personalize your marketing messaging and help you capture more business from these burgeoning demographics (predicted to inherit $66 trillion by 2030).
• Enacting retention campaigns – After acquiring new clients, you want to keep them for as long as possible. After all, acquiring new clients costs up to five times more than keeping your current ones. Unfortunately, 20% of clients leave their financial advisors within the first year. AI can identify which clients pose the greatest risk of attrition and enact targeted retention strategies.
• Refining your marketing tactics over time—You should evaluate their results regularly after implementing new marketing tactics. AI can make this process a breeze by analyzing your marketing metrics and offering predictive insights about what strategies are most likely to succeed. For example, AI can suggest the best times to send emails and uncover which types of content resonate most with different audience segments.

Want to learn more ways to grow your business this year? Check out our 2024 Guide to Financial Advisor Marketing.

#5 Streamlining Customer Support

Investing and financial planning can be complicated. As a result, leads and clients often have a lot of questions about the process. While many of these questions require personalized explanations, AI chatbots can manage some client inquiries on your behalf.

For example, you can program your website’s AI chatbot to:

• Break down basic financial planning concepts
• Answer common questions about your services
• Schedule consultations with prospective clients
• Steer visitors to web pages that can satisfy their queries
• Collect feedback from website visitors about their user experience

As your AI chatbots respond to these queries in real time, your leads and clients can enjoy immediate support. Meanwhile, you can focus your time on more complex questions and tend to other aspects of your customer service.

#6 Portfolio Optimization

While AI hasn’t eliminated the need for human involvement in customer service just yet, it dramatically surpasses people in the realm of data analysis. AI algorithms can analyze large data sets in seconds. This swift data analysis can help you optimize your clients’ portfolios by:

• Improving investment decisions – AI can identify trends in asset performance, interest rates, inflation, and market volatility, helping you make more informed investment decisions.
• Balancing assets – AI can automatically rebalance your portfolios to align with your clients’ goals and risk tolerance amid evolving market conditions.
• Predicting portfolio performance – Leveraging predictive analytics, AI can conduct detailed scenario testing to simulate how your portfolios might perform under various market conditions.
• Optimizing taxes – AI can hone your tax-loss harvesting by uncovering worthwhile sale opportunities to maximize clients’ long-term tax benefits.

#7 Strengthening Regulatory Compliance and Reporting

All financial advisors must adhere to strict legal and ethical standards. Failing to comply with certain regulations can result in costly legal penalties and reputational damage.

Fortunately, AI can make your regulatory compliance and reporting much easier by:

• Monitoring transactions – AI can alert you to any unusual patterns that may suggest insider trading or money laundering.
• Automating reporting – AI can generate regular reports on your behalf, reducing your manual workload. Additionally, AI can ensure these reports are filed on time.
• Streamlining Know Your Customer (KYC) procedures – AI can automate identity verifications and background checks, streamlining your client onboarding process.
• Notifying you of regulatory changes – Laws and regulations can change at any time. AI can immediately track and alert you about these changes, enabling you to adapt your compliance procedures promptly.

Will AI Ever Replace Financial Advisors?

Since AI can automate so many aspects of financial advising, you may wonder (and worry) if your job is at risk. If so, you’re not alone. According to the Accenture survey, 38% of advisors fear that AI’s financial planning abilities will outpace their own within the next 18 months.

Fortunately, the majority of people still prefer working with human financial advisors. That’s because investing can be an emotional undertaking. Clients want a real person to walk them through the process and reassure them about their asset allocation. They also want to work with someone who understands the emotional gravity of their investments, whether they’re preparing for retirement or establishing their children’s college funds.

While AI can assist with many essential processes, it can’t replace human advisors’ expertise and emotional intelligence. Thus, it’s unlikely that AI will replace financial advisors any time soon. Instead, AI can help advisors develop deeper relationships with their clients and provide better support by taking more tedious tasks off their hands.

4 Challenges of Implementing AI For Financial Advisors

Since AI has so much to offer, you may be interested in implementing it in your business this year. Before you start testing out different tools, you need to understand the potential challenges of deploying AI in the finance industry.

Some of these challenges include:

1. Data privacy and security—Financial advisors handle their clients’ most sensitive information, and keeping this data confidential is crucial. Unfortunately, many AI tools feed users’ data into their models, allowing it to fall prey to prying eyes. For example, ChatGPT logs every interaction and sends some of them for human analysis.
2. Regulatory compliance – As we discussed earlier, AI can strengthen your regulatory compliance in several ways. However, some AI solutions may also inadvertently violate certain compliance standards, such as the fiduciary rule or SEC requirements.
3. Integration – Implementing new technology often comes with a learning curve. As a result, over half of wealth management firms say AI tools are too complicated to use. What’s more, legacy technologies don’t always integrate smoothly with modern AI solutions.
4. Resistance to change – As with all new technology, some people will be hesitant to embrace it. Forty-four percent of financial advisors say their firm’s culture is the biggest impediment to its AI adoption. Additionally, 64% of advisors believe their firm is piloting too many AI tools at once. Educating your team and slowly implementing tools can help ease reluctant advisors’ reservations.

Considering these challenges, choosing your AI solutions carefully and deploying them at a reasonable pace is important.

Alden Investment Group: Quantum Leap Your Financial Practice With AI

AI is currently driving an inflection point in the financial industry, transforming how financial advisors manage administrative tasks, make decisions, and allocate their time toward customer service. If leveraged in the right ways, AI has the potential to quantum leap financial advisors’ productivity and profits.

If you need help selecting and deploying AI solutions, Alden Investment Group can help. As a registered investment advisor (RIA) and a broker dealer, we’re experienced in matching our financial advisors with supportive tech tools. By joining our RIA, we can help you choose AI solutions that are secure, compliant, and easy to integrate.

Are you interested in joining a new firm? Contact us today to learn more.

Sources:

National University. 131 AI Statistics and Trends for 2024.
https://www.nu.edu/blog/ai-statistics-trends/

PWC. PwC’s Global Artificial Intelligence Study: Exploiting the AI Revolution.
https://www.pwc.com/gx/en/issues/data-and-analytics/publications/artificial-intelligence-study.html

Accenture. AI in wealth management: All systems go.
https://www.accenture.com/us-en/insights/capital-markets/wealth-management-artificial-intelligence-all-systems-go?c=acn_glb_fabricoftheindgmediarelations_13142356&n=mrl_0622

Black Rock. How Advisors Are Increasing Efficiency and Impact With AI.
https://www.blackrock.com/us/financial-professionals/insights/how-advisors-use-ai

The American College of Financial Services. What Do Clients Want from Financial Advisors?
https://www.theamericancollege.edu/knowledge-hub/research/what-do-clients-want-from-financial-advisors

Accenture. Financial Advisors in North America Say AI Can Help Grow Their Business, but Adoption Can Be Challenging, Accenture Research Reveals.
https://newsroom.accenture.com/news/2022/financial-advisors-in-north-america-say-ai-can-help-grow-their-business-but-adoption-can-be-challenging-accenture-research-reveals

McKinsey & Company. The value of getting personalization right—or wrong—is multiplying.
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Forbes. Customer Retention Versus Customer Acquisition.
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FA Magazine. Client retention: Why clients leave and five ways to encourage them to stay.
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Rethinking65. Tech-Savvy Investors Still Need Human Advice: State Street.
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