Plenty of industries are wringing their hands about the AI revolution, with workers worried they may be rendered obsolete by a cheap infinity of ones and zeros. Hollywood, to name one, shut down for five months partly because the writers’ and actors’ unions wanted protections from how the tech’s used in TV and filmmaking. Financial services are a different story, however: Some fear may be present, but in many cases, professionals are embracing AI and trying to be at its cutting edge.
To be clear, AI is never going to treat us to a round of golf to discuss investment strategies. But the technology is already a game changer for financial advisors, capable of bringing in new clients and assets.
A Deeper Tool Box
When it comes to advising, AI programs aren’t yet ready to be the brains. “It’s a tool. It’s something that can make things easier, better, and more efficient,” said Ken Lotocki, chief product officer at Conquest Planning. It’s like when carpenters moved from a hand crank auger to an electric drill. The person holding it is still the actual mastermind, so the 38% of advisors who said they fear AI will outpace their own abilities in an Accenture survey can probably afford to take a breath.
In financial services, AI programs are largely used as office and administrative tools, and they come in many forms:
- Wealth.com’s Ester product quickly summarizes legal documents for estate planning purposes.
- A program like Jump records client conversations and then extracts important data, generates to-do lists, and drafts follow-up emails.
- Saifr reviews marketing materials to ensure they follow compliance guidelines, a very lengthy process when done manually and very costly when done incorrectly.
“AI today is very firmly in the co-pilot stage,” said Danny Lohrfink, Wealth.com co-founder and chief product officer. “It’s taking very manual and tedious tasks and automating them with advisor oversight.”
But that will change as AI programs collect more and more data, Lohrfink said. For example, Ester is expected to get better at understanding estate planning documents as it handles more of them. Essentially, the machines are learning.
“We’re going to get to a place where that co-pilot review is no longer necessary because the accuracy rate is going to be so high while the margin for error is so low,” Lohrfink said.
The Advisor’s Advisor: Beyond taking on office gruntwork, AI is assuming direct support roles for advisors. For example, Conquest Planning has a program called Strategic Advice Manager, or SAM for short. It’s not generative or predictive AI, Lotocki said, but what it can do is assess a client’s financial plan and notify advisors on what decisions they might want to make next.
“SAM is the caddy and the user is the golfer,” Lotocki said. “It’s not going to hit the ball, but it knows the course and the clubs.”
If a client’s cash flow has changed, SAM could tell the advisor that the client should start adhering to a tighter budget. Or if a client has come into more money, SAM will suggest maximizing 401(k) contributions.
The demand for these kinds of tools is evident, as firms look to stay competitive and bring in more assets:
- Only about 9% of advisors currently use AI tools, but more than half plan to start using them in some fashion in the next year, according to a BlackRock report published in September.
- Wealth managers’ IT budget allocations for AI are expected to more than double — from 16% to 37% — within the next 3-5 years, according to a Wipro report last month.
In the next five years, AI integration is expected to drive 52% of revenue growth in the financial services industry, according to a Seismic report.
Down With The Young People
For advisors, AI could determine how competitive they are going forward. We’re in the middle of a great wealth transfer that will see $84 trillion pass down to younger generations over the next 20 years. And it’s no secret that younger people are tapped into computers more than their parents. They’re going to be seeking out advisors who can seamlessly integrate technology with human expertise.
“To younger Millennials and Gen Z, instant access to information isn’t just nice to have, it’s a must have,” Lohrfink said. “If your tech stack is not well positioned to meet the needs of digitally native populations, you’re going to lose those clients when the wealth transfer happens.”
We Don’t Need No Regulation
Now, Americans’ money is obviously something the federal government takes incredibly seriously, but when it comes to the role advanced computer programs play in advising, specific regulations are nonexistent. The Securities and Exchange Commission has recognized AI as one of its top priorities for 2025, but currently there are no guidelines on how advisors can and can’t use the tech. It really all boils down to the regulations advisors have always had to follow — are clients being represented fairly and accurately?
Last year, the SEC proposed rules meant to eliminate potential conflicts of interests tied to predictive data analytics (PDA), but many in the industry have criticized the rules for being vague and onerous:
- Technically, Excel spreadsheets with formula-embedded cells — a 1980s technology — would fall under the proposed regulations, Bloomberg Law noted.
- Plus, the rules would require advisors to inventory all uses of covered technology and how they might potentially create conflicts of interest that would favor the firm’s profitability over clients’ portfolios, which can quickly become a herculean and costly task.
There’s no timeline on if and when the regulations could be passed, and in February, Sens. Ted Cruz (R-Texas) and Bill Hagerty (R-Tenn.) introduced a bill that would block the rules. Plus, with Donald Trump re-entering the White House next year, the SEC will be a different place.
The Human Touch: Some industries have begun incorporating AI as a pivotal creative force in their work. One of the strangest examples might be the children’s cartoon “Warren Buffet’s Secret Millionaires Club,” a largely AI-generated series that sees the 94-year-old business leader mentor a group of kids on how to best invest for their futures, and in one instance, tell them scary stories about Big Foot. Even if Cartoon Buffett’s lessons may be sound, the animation and dialogue are remarkably bland, but don’t be surprised if more and more shows start going down the AI-generated route.
Thankfully, the advising industry does seem ready to move as far as fast. Lohrfink said the most important difference between an advisor and an AI is the ability to ask the follow-up questions. “A human can say, ‘What about that dream home in Salt Lake City you told me about three years ago?’” he said. “An AI can remind you of that conversation, but the human is going to be the one asking those esoteric additional questions.”
Investors still need an actual living person they can rely on for quality advice, not a machine. A part of human psychology is that people are “unwilling to make decisions for themselves oftentimes,” said Ritik Malhotra, CEO of Savvy Wealth, a group that provides digital platforms to advisors. “Even the top surgeons in the country refuse to make personal decisions for their families and will ask another doctor to make them.”
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