Nearly all large advisory firms have some sort of artificial intelligence user interface, but these client-facing systems can cause stress, confusion and fear — and ultimately reduce personalization, Angie Herbers writes on ThinkAdvisor. But, with proper implementation, AI can benefit a firm and increase rather than mitigate the need for a human advisor, she writes.
Why Big Firms Are Making AI Mistakes
Smaller independent firms — those with less than $10 million in revenue — should steer clear of AI entirely, since the current costs and risks mean it could do more harm than good, according to Herbers. On the other hand, large firms — those with over $1 billion in assets under management — should be exploring AI, she writes. Unfortunately, many of those who do use AI incorrectly by focusing on clients rather than advisors, according to Herbers.
Firms should instead use AI as part of their backoffice, where it can help scale and increase efficiency, she writes. Before even considering AI, firms should map how they function, their service model and what they offer to clients since it will take a year to get an AI consultant up to speed with these systems once onboard, according to Herbers. Furthermore, any good AI system must deal with clients’ financial and behavioral issues and meet the firm's specific needs, so it should be developed by an in-house software development team, she writes.
Some of the best AI implementation so far has been for advisor training, since it shortens the learning curve, which in turn frees up advisors to focus on areas such as communication skills and behavioral science, according to Herbers. This means advisors can still add value through mitigating fear and enabling good financial decisions even when computers run all financial calculations, she writes.
