Emerging technologies, such as artificial intelligence (AI), are poised to change how financial advisors conduct business — and largely for the better, according to a new white paper by the Capital Markets Co. Group (Capco).
“Technology is a critical part of the future of [providing service to] clients,” says Gary Teelucksingh, a partner, wealth and investment management, with the global management consultancy company, in Toronto, and an author of the white paper Transformative Nature of Artificial Intelligence (AI) in Wealth Management. “Advisors should be aware of [this technology] and advocating for their firms to be aggressively adopting technology that helps them service clients.”
AI, which is the power of a machine to copy intelligent human behaviour, is already present in the wealth-management industry. For example, digital wealth-management companies, or robo-advisors, use a form of AI to gather client information and designate an appropriate portfolio.
As well, DBS Bank Ltd. in Singapore has partnered with Armonk-based IBM Corp. to use IBM’s AI platform, which is called Watson, to offer client specific portfolio recommendations to DBS financial advisors.
Although AI is still in its infancy, it’s likely to prove to be a positive development for traditional financial advisors and their firms, the Capco report suggests, because of the potential to make the advisory business more efficient.
For example, AI could identify instances in which an advisor would typically contact a client, such as a change in the portfolio, a change of address, or the sending out of an annual statement. In this case, however, the AI software, not the advisor, would automatically contact clients to address the issue. The advisor would only get involved if a follow-up action, such as an in-person meeting, were required.
“It’s that part [of the relationship] that the advisor would spend more time doing,” says Teelucksingh, “not initiating the contact, not the [service] call.”
In other cases, AI technology could be used to gather more detailed information about clients. More specifically, AI software might scan the Internet for publicly available information that could give advisors insight into their clients’ potential financial needs.
For example, AI could keep track of a client’s public social media use and infer opportunities for the advisor to start a conversation, such as frequent travel to a possible retirement property.
Cacpco’s report notes that as clients become more comfortable with the use of AI, financial services firms may even create portals to collect more private information with permission from the clients. Of course, advisors and their firms will have to be careful about the use of such platforms and to make sure client data are kept safe.
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