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More advisors are turning to artificial intelligence (AI) and machine learning to enhance client relationships, boost productivity and stay competitive in the rapidly expanding digital economy.

AI is one of the financial services sector’s top priorities, according to a 2021 PricewaterhouseCoopers report, which says some firms are investing heavily in the technology to help them with everything from investment decisions to customer experience and risk management.

“AI isn’t just the future. For more and more asset and wealth managers, it’s the present, delivering benefits to the back office and the business today,” the report states.

AI is still relatively new in the wealth management business, but its use is expanding quickly, says Robert Madej, founder and chief executive officer of PureFacts Financial Solutions Inc. The Toronto-based company helps asset and wealth management companies use AI in areas such as fee and revenue management, client retention, and portfolio optimization.

Globe Advisor spoke with Mr. Madej recently about AI’s role in the industry and its future.

Why are more advisors using AI?

One of the main use cases for AI for advisors is customer retention. AI can be used with customer relationship management software to help create a clearer picture of a client.

Advisors want to understand their clients better so they can predict what their financial needs are and what potential solutions to present them with. For instance, somebody who’s single may not be as interested in a life insurance product as somebody who just had their fourth child.

AI also tracks the different actions an advisor takes and the outcomes and predicts which ones will work better than others. This helps them retain clients for longer.

Many advisors already do this kind of work, so why is using AI better?

The computer never gets tired. It can analyze more and more data continually.

An advisor might have 500 clients, for example, all of whom have different needs. It’s a lot of information for an advisor to have top of mind. AI can assist the advisor in creating better possibilities to serve the client.

How can AI help advisors work with clients in the current market environment?

Client retention is probably more important during a down market because that’s when clients are watching their portfolios more closely and might be thinking of changing their advisor if they’re not satisfied.

If you can plot out your next best action [using AI] and coach a client along, you’re more likely to keep them. There’s also a huge [return on investment].

Will AI eventually replace advisors?

AI will never replace advisors because computers aren’t very intuitive; humans are.

That said, I believe advisors who don’t embrace AI as a tool, longer term, are putting themselves at risk of going out of business. More advisors using AI will reach a point at which they’ll be making better decisions,be more responsive, and serve more clients.

That will allow really good advisors to serve more clients in a better way and expand their business without necessarily having to grow their resources. I believe that by 2030 almost all advisors will be using AI to help grow their practices and service their customers.

This interview has been edited and condensed.

- Brenda Bouw, special to the Globe and Mail

Must-reads from Globe Advisor this week

How falling mutual fund fees raise the bar for advisors

Canadian mutual fund fees are falling. For investors, that means lower costs, but the trend also reflects rising client expectations for advisors. Being in a lower-fee environment isn’t going to solve the main problem of poor portfolio construction for advisors and investors, experts says.o Jmameeson Berkow looks at what’s driving lower fees and how this will impact the service and productKira Vermond takes a look at why some advisors want to keep working.king.ing.ng.g.

Are hard-hit consumer discretionary stocks an opportunity?

Few sectors have been beaten up more than consumer discretionary stocks amid concerns about high inflation and a potential recession, leaving money managers wondering what comes next. The sector is also considered among the first to see their revenue fall as consumer confidence declines. Joel Schlesinger weighs the pros and cons of investing in the space and which names can stand the test of time.

What retirement? Some advisors delay leaving the job

While many advisors dream of the day they retire so they can travel, spend time with their grandkids and leave workplace frustrations behind, there’s another cohort who seem not to have heard the call. They’re working well into their golden years. Rather than working with 400 to 500 clients, some eventually pass over the bulk to an associate and retain 60 or 70 of their preferred families. Kira Vermond takes a look at why advisors want to keep working.

Cybersecurity funds offer bright spot in tech market rout

Investors are weathering the biggest attrition in the value of technology stocks since the dot-com bust, but experts are citing cybersecurity as a business more resilient to recession than most. Cybersecurity stocks fell 4 per cent during the first quarter compared to a 9 per cent decline in the Nasdaq Composite. Danny Bradbury reports on opportunities in cloud-based cybersecurity and how exchange-traded funds (ETFs) can offer a safer bet.

Also see:

Four rules to see beyond product marketing in responsible investing

Fund industry heavyweights muscle in on ETF market

How the investment industry can prepare for a rise in client complaints amid the market downturn

How often should financial planning be done to be most effective?

Global interest rate gaps loom large for investors

What you and your clients need to know

Investors pile into cryptocurrency ETFs as sector loses value

Investors are continuing to pile money into Canadian cryptocurrency ETFs despite the sector losing more than US$1-trillon in value globally so far in 2022. Canada has about 40 crypto ETFs. Even as the price of bitcoin and ether continue to plummet this year – down almost 35 per cent and 50 per cent, respectively – the sector has managed to maintain positive sales for the year. Clare O’Hara reports on the trend and the sector’s outlook.

What to consider before dipping into the pummelled cannabis sector

Deeply depressed share prices can appeal to contrarian investors, but the marijuana sector is saddled with an unfortunate problem that might deter bargain hunters: Sales are not living up to expectations. Regardless of which pot stock you look at, prices are down a lot. David Berman debates whether investors should wait this one out.

Why more retirees are choosing to go back to work

Research shows Canadians past retirement age are increasingly choosing a mix of leisure activities and paid work compared with the more predictable hard stop of past generations. While some keep working because they need money, others decide to stay in the workforce for other reasons; they like the stimulation and social life that comes with having a job. Saira Peesker looks at the motivations driving this cohort.

- Globe Advisor Staff