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With predictive analytics, AI-powered systems can identify topics and objectives that will be of interest to clients in the future and notify advisors of a coming graduation, retirement or other major life events.DADO RUVIC/Reuters

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The launch of the latest version of ChatGPT has renewed the world’s fascination with artificial intelligence (AI), and companies in many industries, especially financial services, are paying close attention – or at least they should be.

New research from Broadridge Financial Solutions Inc. shows that the wealth management industry is investing heavily in AI. The world’s most technologically advanced wealth management firms expect to increase their spending on AI by 22 per cent over the next two years.

These firms believe AI will transform their industry. In fact, the revolution is well underway. Two-thirds of the wealth management professionals who participated in the Broadridge Digital Transformation and Next-Gen Technology Study said AI is already changing the way they work significantly.

So, what should wealth management firms be doing now to make the most of emerging AI capabilities? How can they position themselves for a future in which this technology and machine learning play a central role in business and investing? Here are five ways to integrate AI into advisor practices.

1. Build a foundation of data

The first step is building a foundation of reliable, timely and accessible data. AI is only as good as the data that feeds it.

For firms to capitalize fully on AI’s promise, they will first have to tackle the problem of data fragmentation. Wealth managers should be in the process of centralizing, standardizing and upgrading internal data management. They should be leveraging technology systems and establishing data governance policies that enable the seamless movement of data across their organizations.

Efficient data management platforms will be a foundational requirement for all financial services firms to truly unlock AI’s power. These platforms will tap into client journey data from customer relationship management, financial planning tools, client transaction histories, customer engagement engines and other internal systems for use in AI applications.

2. Create personalized experiences

Next, wealth management firms should be mapping out strategies to personalize their offerings with AI.

The data wealth managers cull from internal systems and external sources hold invaluable information about clients and prospects. AI tools can comb these data for insights into client needs, preferences, and characteristics such as risk tolerance, financial expertise, ideologies, and goal planning priorities.

With predictive analytics, AI-powered systems can identify topics and objectives that will be of interest to clients in the future and notify advisors of a coming graduation, retirement or other major life events.

Advisors can use these insights to trigger outreach, inform conversations, and customize product recommendations and advice. Advisors can also use AI-enabled platforms to deliver personalized content automatically and at scale across an entire client roster.

3. Discover new applications, manage new risks

Wealth managers should be exploring additional ways to exploit the growing power of AI such as deploying automated digital tools that can help attract younger investors.

Many of the millions of investors who entered financial markets in the past decade started out using self-directed trading platforms to invest by logging on to websites, social media and robo-advisors for ideas. As these investors age, form families and accumulate assets, many will turn to full-service advisors.

We’re seeing this trend play out now as former do-it-yourself investors seek out professional advice in increasingly volatile financial markets. Wealth managers should be exploring AI tools that can help provide lower-touch, lower-cost services, attract these young investors and act as a feeder channel for full-service advisory relationships later.

As firms experiment with new AI applications, they should also be thinking about a governance process or set of principles to guide their use of the new technology. AI platforms alone can’t make investment recommendations to clients, and firms will need to establish how to marry the expertise of their staff of professionals with AI-generated content before presenting recommendations to clients.

Establishing these procedures and managing the risks associated with AI will require a coordinated effort involving advisory teams, technology professionals, legal departments and senior management.

4. Increase advisor productivity

AI is likely to have the biggest near-term impact by being incorporated into the tools advisors already use. Specifically, areas of opportunity include using generative AI to notify advisors (and clients) proactively about market events, identify gaps in an advisor’s knowledge about the client, provide education and training for new products, and use natural language processing for notes and summarizing action items.

If used in these ways, AI has the potential to enhance advisor productivity dramatically, freeing them up to spend more time on key client interactions.

5. Apply the human touch

As they integrate these powerful technologies, wealth managers cannot lose sight of their core competitive advantage – the human touch.

From a strategic perspective, firms should be using AI to extend their advisors’ reach and capabilities. AI has the potential to transform the wealth management industry by enhancing client experiences and outcomes dramatically and making the business more efficient and profitable for advisors. But the ultimate goal should be creating a hybrid model that leverages technology and advisors’ best aspects.

When a client is scared about falling markets or worried about paying for a college education, there is no technology that can replace the comfort and value of a conversation with an experienced advisor.

Donna Bristow is chief product officer, wealth management, at Broadridge Financial Solutions in Toronto.

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