Published in The Globe and Mail on December 9, 2024

If asked to imagine what a relationship with a financial advisor will look like in the not-so-distant future – when the majority of business processes integrate artificial intelligence (AI) and other revolutionary technologies – many of us envision interacting with an AI bot on a computer or a smartphone.

The bot, which presents itself as a friendly assistant, takes care of everything from answering questions and making requested changes to providing investment recommendations and managing portfolios automatically to our exact preferences. The process is easy, convenient and conducted without a human advisor.

However, while it seems counterintuitive, technological advances could lead to more direct interaction between financial advisors and their clients – not less. And the increasing adoption of AI will make those interactions more beneficial and valuable to both sides.

Aiming AI investments at the client experience

According to the results of Broadridge Financial Solutions Inc.’s 2024 Next-Gen Transformation Study, almost three-quarters of wealth management firms have made AI a top priority for future investments. Until recently, much of that AI spending was directed at cost savings. Wealth managers and other financial services firms focused early efforts on harnessing AI to build operational efficiencies and reduce expenses.

Today, wealth management firms are motivated more by the desire to build better client relationships when they’re deploying AI. Customer interaction is the top functional area targeted for AI investment. The result will include new self-service tools that allow clients to carry out routine tasks themselves online.

Although AI-enabled do-it-yourself capabilities will mean fewer conversations between clients, wealth management firms and their advisors in the short term, over the long term, automating routine client service functions will set the stage for more direct interaction between advisors and their clients.

Better insights for better service

By eliminating or at least reducing the amount of time advisors spend on day-to-day client service dramatically, self-service tools that handle routine client interactions including appointment bookings, client information updates, account balance queries and performance reporting will free up hundreds of hours a year for advisors.

Other AI advances will free up even more time. For example, advisors traditionally spend hundreds of hours a year collecting data, conducting analysis and formulating recommendations for clients. Today, AI-based platforms can do most of that work instantly.

New technology systems can scour internal and external data sets for information about client demographics and financial and personal situations, needs and preferences, then determine which topics and products are most relevant and appropriate, and deliver insights.

Not only do such platforms eliminate hours of research, but they also enhance the quality and impact of the ideas dramatically. Until now, advisors had a choice: They could devote time to developing a deep understanding of a client and producing sound recommendations on essentially a case-by-case basis, or they could fall back on generic advice aimed at a certain type of client, usually segmented by age, assets and other demographic categories.

AI-powered applications provide advisors with personalized insights and recommendations tailored to the precise circumstances and needs of individual clients – and they can do so across a portfolio of hundreds or even thousands of client accounts.

In this new hyper-personalized environment, advisors will have frequent touchpoints with clients – sometimes digitally, through AI-driven communication tools, and sometimes in person.

When investors and their advisors connect for conversations, clients will benefit from the advisor’s AI-enabled insights into their own personal situations and portfolios. These conversations will also become more valuable to advisors, whose personalized approach will unlock new opportunities to expand the relationship with new products and services that meet clients’ interests and needs.

What’s next

The wealth management industry has considerable work ahead. Currently, firms are in the process of overhauling legacy data management systems. To unlock the power of AI, wealth managers will need an uninterrupted flow of standardized, reliable and timely data.

The data streams that feed into AI applications will have to integrate the firm’s internal data with real-time market data as well as data from other external sources. Most large firms are well along in their data management redesigns, but many smaller firms lack the resources for a complete rebuild and have a long way to go.

The industry has reached a tipping point concerning technology. Not too long ago, many advisors saw technology as the enemy. As low-cost “robo-advisors” captured headlines, traditional wealth managers wondered if there would still be a place for human advisors.

Today, advisors understand how technology, and AI in particular, can allow them to have more frequent and more valuable conversations with clients. By leveraging AI alongside their advisors, firms can maximize the strength of both technology and human expertise resulting in a superior client experience.