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AI Is Coming for Wealth Management. Here’s What That Means

Experts weigh in on how artificial intelligence will change the money business.

(Bloomberg Markets) -- Artificial intelligence is making remarkable progress in a wide array of tasks, as demonstrated by the rollout of OpenAI’s GPT-4 and Alphabet Inc.’s Bard. We asked experts how this technology will affect wealth management. Their responses are edited for length and clarity.

David Bailin
Chief investment officer and global head of investments at Citi Global Wealth

AI will allow the client to access an incredible amount of information and ask questions in a language that the client is comfortable with and receive answers. For practitioners, the limitation it will have will be in researching what is happening today with that company, that security, that market—it will have real limitations on contemporaneous action. Footwork will always be necessary in making investment decisions.

It will absolutely improve client education, and it will absolutely improve the repetitive tasks of a practitioner—it will be an incredible efficiency generator.

Jimmy Chang
Chief investment officer at Rockefeller Global Family Office

I posed the question of how AI will change wealth management to one of the leading chatbots, and it replied that AI will have a significant impact by providing more personalized, data-driven advice in specific areas such as portfolio optimization, risk management, fraud detection, tax analysis and even relationship management. I believe, however, that the adoption of AI is easier said than done. Unlike traditional software that generates predictable outputs, AI’s ability to learn and adapt means that its responses will evolve over time and may be unpredictable.

Training wealth management bots and incorporating their outputs will be more of an art than science as they require nuanced insights, reasoning and judgment across many areas. In time the pupils will outshine the teachers; but for now, don’t let them contact your clients directly.

Sarah Hoffman
Vice president, AI and machine-learning research at Fidelity Investments

Artificial intelligence is on the verge of being fully democratized, and we need to prepare for how this could potentially change every interface that employees and customers rely on.

There will be new opportunities to integrate access to these apps into work experiences and fold these AIs into ­customer-facing tools. With more potent and democratized AIs, it’s entirely possible that new divisions of labor will emerge as formerly arcane areas of specialization become more accessible to a broader audience. More sophisticated AI could also be a silo breaker. There are many efforts to share knowledge within large companies; a more powerful AI model could potentially work across multiple business units, leading to more collaboration and greater efficiency.

AI will impact our lives in the not-too-distant future not by replacing us, but by helping us with a range of cognitive tasks. Already, I can imagine a tool like ChatGPT assisting with upgrading our approach to financial literacy and corporate training. As the financial world gets even more ­complicated—with new assets, new currencies and new frameworks—it’s time to think differently about financial education. While we may not want these tools to advise customers directly, perhaps they can help educate employees, and even help customers prepare before they meet with representatives, so they can ask better questions.

Chatbots can also be very useful as a brainstorming tool, whether it’s for new product ideas, marketing campaigns, companies to invest in or ways to use emerging technology.

Nitin Tandon
Chief information officer at Vanguard

AI/ML [artificial intelligence/machine learning] models are a tremendous enabler to unearth better insights into what our clients are looking to achieve, their investment behaviors and timelines—often better than clients can themselves. Every investor has different and unique goals, so a personalized approach to their needs can make a large impact on their outcomes.

We’re harnessing the power of AI/ML to fuel our two core advice engines—Digital Advisor and Personal Advisor—beginning with the digital onboarding process. In real time our advice engines leverage insights like retirement age, savings and spending, investment behaviors and goal parameters, to create customized financial plans that help clients meet their short-term and long-term financial goals. The outcomes of using this technology in a client-centric way aren’t just in numbers—these insights help families save for their dream homes, workers enjoy the retirement they’ve saved for and give children access to life-changing education. Further, machine-learning techniques enable us to rerun personalized, forward-looking projections anytime a client changes their inputs, which enables real-time suggestions such as increased savings or modifying goal amounts. We’re also using AI/ML within our financial intermediary business to provide data-driven insights that drive in-the-moment client experiences and next best action for clients.

Kevin Levitt
Director of global business development for financial services at Nvidia Corp.

AI will influence every aspect of wealth management from client service to compliance. Generative AI will produce hyperpersonalized content, from advertising copy to email newsletters, increasing the success of campaigns across the entire customer journey from acquisition to retention.

Deep-learning models from computer vision to natural language processing will analyze thousands of data streams in real time to glean market intelligence, delivering signals to wealth managers that improve investment returns. Recommendation systems will produce next best actions, tailored to the goals of the client, that enable financial advisers to best serve customers regardless of the market conditions. Ultimately, these recommenders will fuel self-driving financial applications that will rebalance portfolios, establish new accounts like 529s for college savings, refinance loans and more automatically.

AI-enabled applications will lead to financial advisers serving customers more expertly, increasing their share of assets under management at the expense of wealth management firms that don’t transform their business with AI.

Jon Stein
Co-founder of Betterment

I’ve spent the past 15 years working to democratize wealth management. When I set out, I would’ve expected to have “self-driving money” by now. Real-world challenges, such as inconsistent access to clean, permissioned data across institutions, make this a hard vision to bring to life. But the playing field and the goal continue to change, and today I think of the ideal consumer financial technology as a great co-pilot, and we’re making strides toward that vision, aided by AI.

Generative AI and language models will be integral to the future of our industry. Just as lawyers use AI to simplify case law or draft agreements, financial advisers will use AI to quickly assess client circumstances and articulate goals and plans more effectively. The potential of these tools is immense, and their capabilities are expanding quickly. After creating a plan, AI could be used to monitor client circumstances and recommend corrections along life’s economic path.

Combining language models and other AI models will produce game-changing interfaces and insights. Some innovations I’d like to see: 1) From a “shoebox” of account statements, a model tells me whether my financial life is in order (and whether my adviser is doing a good job). 2) Probabilistic forecasts of outcomes for any investment, based on the data I share with a model. 3) If I share the documentation of two investments, a model simply contrasts and compares them for me.

Disclosure: I used GPT models to help me refine my points.

Andrew Salesky
Chief digital officer at Charles Schwab Corp.

Newer disciplines like predictive analytics and AI are allowing advisers to increase the scale at which they can effectively deliver a customized client experience and powering the solutions that can help them do it. Schwab’s thematic stock lists are a great example—leveraging natural language processing (NLP) to mine terabytes of data and millions of public documents to objectively identify publicly traded companies based on their relevance to a particular investment theme. Schwab Assistant is another—with NLP enabling us to refine our automated service channel that offers 24/7 self-service assistance, creating more ways for clients to interact with us in their channel of choice.

In the near term, I expect we’ll see the most rapid progress focused on the ways in which AI can be used to assist the people whose direct relationships with their clients will continue to be a key competitive advantage in the industry—identifying opportunities to improve the efficiency and effectiveness of everything from completing routine tasks to engaging clients with meaningful, tailored insights. These advancements will come in areas like knowledge management, content generation and enhanced search capabilities that take advantage of generative AI.

Longer term, I anticipate the industry will begin to explore more client-facing applications—things like AI-derived advice.

Susan C. Kaplan
President at Kaplan Financial Services

AI will be a staggering aid in amassing data about markets and trends and relationships between varying forces. In fact, one may drown in the numbers for a time. Eventually, however, one will develop a hierarchy for the quantitative information that is most important. AI will also be essential to capture the varying minutiae of a client’s family connections and financial responsibilities versus goals.

The personal relationship between a wealth adviser and the client is critical, and that’s not easily replicated by AI. Often the “right answer” is not mysterious, but convincing the client that it is necessary for the future of the family is the trick. That is the moment that the psychological connection with the client and the family is the linchpin of success in the financial planning process. Most major decisions are made after extensive discussion of the implications of those decisions. Communication and an emotional connection are critical to persuading the client to make the best move.

David Fortunato
Chief executive officer at Wealthfront

Over the last decade, we’ve seen a powerful movement of software eating financial services. AI is one of the many dimensions of this movement that has already made a mark on the industry. For example, at Wealthfront we were able to develop models using machine learning to help clients understand their saving and spending patterns and reveal insights like how early they can retire. While most of the financial services industry focuses on using automation and AI to lower costs, Wealthfront focuses on applying these models to create a better client experience. We’re able to provide incredible personalization to our clients using simple AI techniques.

More sophisticated AI will facilitate even greater ease of use, personalization, and lower costs in financial services that the consumer will ultimately benefit from. With the right framework and inputs from the client, AI can empower more people to be in control of their finances and make informed decisions. The days of needing to meet in person with an adviser will become obsolete.

Schmidt and Albright write about wealth for Bloomberg News in New York.

To contact the authors of this story:
Blake Schmidt in New York at [email protected]
Amanda Albright in New York at [email protected]

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