By Ben Mattlin/ FA-mag.com
Artificial intelligence (AI) may sound like science fiction, but it’s already integrated in many smartphone apps and other aspects of daily life. Perform a Google search or online chat with customer service, and chances are you’re using it.
Nationwide Advisory Solutions (formerly Jefferson National) recently commissioned a study of AI in the financial services industry, and its findings illustrate the shape of things to come.
Namely, 66% of RIAs and fee-based advisors—and a whopping 94% of early adopters—believe AI gives them a competitive advantage. For example, “chatbots” work round-the-clock to respond to client questions. AI can also assist in fraud detection and account management, and can help firms understand their clients better, predict their priorities and provide personalized holistic planning.
“Advisors need to manage disparate data from multiple sources on a daily basis,” says Craig Hawley, head of Nationwide Advisory Solutions. “Artificial intelligence is an effective solution to make the complex simple.”
Hawley explains that fee compression is driving demand for greater efficiencies and more automation, while the commoditization of investment management is forcing advisors toward greater specialization and fueling the drive for more customized and holistic financial planning.
“AI has the power to help on all three fronts,” he says.
Ed Swenson, chief operating officer and co-founder of Dynasty Financial Partners in New York City, believes the technology in the future will revolve around data. “The convergence of data and AI is fundamental to the success of wealth management firms of the future,” he says.
Swenson expects artificial intelligence to also play a significant role in asset allocation and portfolio rebalancing. “A financial advisor able to harness data through immense processing power and marrying that with capital market assumptions will make much more efficient investment decisions than humans can make on their own.”