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While some barriers to adoption remain within the advisory business, it’s clear that artificial intelligence (AI) is being deployed at scale across the financial services space and there’s room for substantial growth in the years ahead. Both factors have significant implications for advisors.
Following a year in which advisors made strides in terms of embracing generative AI, it’s increasingly clear that some advisors are realizing that this technology is not intended to usurp advisors’ most important functions, including direct client interaction and portfolio construction. Likewise, it’s also clear that more and more advisors see value in AI when it comes to increased productivity.
AI is on advisors’ radars, but broadly speaking, adoption is a different story. Many are taking a cautious approach and that’s understandable, but that pragmatism carries risk. Advisors that are slow to embrace AI could be left behind by technology-adept competitors and that’s something to ponder at a time when an increasing number of clients want advisors to be tech-proficient.
Increased productivity, particularly in the form of easing the burdens of compliance and mundane tasks, could be the tipping point for broader AI adoption and that could occur as soon as next year.
Proof Is in the Productivity Pudding
A recent study by Bain & Co. highlights the productivity gains made by financial services when they ramp up use of AI. While the study isn’t specific to the advisory/wealth management space, the point is AI is making its mark in the financial services sector and advisors need to be ready for that shift.
“The effects of generative AI translate to an average productivity gain of 20% across uses, according to survey respondents,” notes Bain. “We’ve reached a stage where companies now monitor when—not if—the use of AI will generate value across the board.”
While the following numbers aren’t applicable to smaller or independent practices, it’s also clear that sizable financial services firms of all stripes are willing to devote significant capital to AI, indicating they see long-term value in the technology.
“Financial services firms with at least $5 billion in revenue are investing an average $22.1 million in 2024, with about 270 full-time equivalent staff involved on average, compared with $17.6 million for other industries,” adds Bain. “The top decile of firms are investing an average of more than $100 million in 2024.”
In an effort to reduce AI costs, many financial services companies are developing AI applications in house and for advisors, that’s highly possible because many of what are currently the most useful generative AI tasks for advisor are available for free or at low prices.
Time Is Now for Advisors to Embrace AI
For advisors making business-related new year’s resolutions, make sure that in some form or fashion, AI is on the list because your competitors are doing the same.
Yes, it’s still the early innings for the AI/wealth management intersection, but this is a value creator and it’s materializing at a time when clients want more value.
“Overall, our survey suggests that financial services companies have already reaped value from generative AI, expect to gain still more value, and thus are investing in talent and other resources,” concludes Bain.
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