As deployment of artificial intelligence (AI) increases in the wealth management industry, more attention is being paid to client perceptions regarding the use of this disruptive technology. That increased focus is a boon for advisors.
Think about it this way. Recent research from the Financial Planning Standards Board (FPSB) indicates two-thirds of advisory firms are already using AI in some form or fashion. The smart ones are using their newfound tech proficiency as a tool to woo tech-savvy young prospects.
“As AI continues to reshape financial services, the firms and advisors that proactively educate clients on the security and value of their AI-enhanced offerings will gain a competitive edge and be better positioned to capture a larger share of the retail investor market,” according to Lanson’s.
The above quote is good news for AI-adopting advisors and notice to those that are still on the fence that they should probably get with the program, but the intersection of AI and wealth management presents advisors with other considerations. For as enthusiastic as many clients are about AI-related investments, they have reservations about applications of AI in investment management – a point advisors cannot ignore.
Some Good News for Advisors
There was a period, some might say it’s still in effect, when AI appeared to be a threat to advisors. The technology was perceived as a replacement threat, stoking speculation that a day would come when clients would be discussing their most intimate financial details with a computer or robot. Those concerns appear to have been allayed because the vast majority of clients want the human touch.
In other words, AI is complement to advisors’ objectives, not a replacement. That’s good. Another positive for advisors is the extent to which many retail investors doubt AI’s applications in terms of financial advice and securities selection. As just one example, the Lansons survey points out that 38% of respondents disagree with the statement “I would trust the accuracy of AI-generated financial recommendations” compared with 28% that agree with it.
Additionally, 36% disagree with the notion that AI can do a better job of asset allocation than a human can while just a quarter of respondents agree with that claim. Forty percent disagree that they’d be more likely to invest with a platform using AI as part of the client experience while 26% agree they’d do just that, according to Lansons.
“While AI may be able to support portfolio decisions and help generate alpha, it’s unlikely to replace the trusted relationships advisors build with clients over years,” notes James Schiavone, head of operations for Lansons New York. “Understanding how investments fit into a client’s broader financial picture, and using emotional intelligence to guide difficult decisions, is still a job best suited for humans. ”
Women More Wary of AI
For advisors working with women, it might be wise to assure those clients that a human is in fact overseeing their money. Lansons points out 22% of women would trust AI to make financial recommendations compared to 34% of men.
Likewise, just 21% of women would be more inclined to use an AI-driven investment platform, notably less than the 31% of men that said they’d be interested in such an offering.
Bottom line: AI has plenty of applications in the wealth management space. Plenty of clients want to hear about those, but it’s best to leave the human side of the business to, well, humans.
