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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
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