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Artificial intelligence (AI) has swept the investment landscape this year, stoking a significant rally among large- and mega-cap growth stocks. While much more is expected on that front, AI also brings with it myriad industry-level implications.
Those include potential disruption in financial services, including advisory and wealth management practices. AI isn’t something for advisors to fear. Rather, it’s something to be embraced because it can bolster practice efficiencies and perhaps the bottom line.
“The financial industry is experiencing a paradigm shift with the integration of AI technologies. Machine learning algorithms, natural language processing, and predictive analytics are revolutionising processes, from risk management to customer service,” noted deVere Group CEO Nigel Green. “AI-driven insights enable financial institutions to make data-driven decisions, enhance fraud detection, and streamline operations. Investors should consider seizing potential opportunities in this sector by looking at investments in fintech companies and financial institutions embracing AI to gain a competitive edge.”
In fact, a case can be made that the intersection of AI and financial advice is a lead, follow or get out of the way proposition. Those quick to adopt AI could well flourish and deliver a superior client experience. Advisors that are slow on this front may be left wondering what could have been.
Advisors Appear Ready for AI
Data indicate advisors, broadly speaking are ready for AI and are among the least skeptical financial services professionals regarding this disruptive technology.
“Amid these universal adoption plans, just over one in five respondents said they are nervous or skeptical about the potential impact of GenAI on their organization,” according to Ernst & Young. “That same percentage also does not feel confident that their organizations are well-positioned to take advantage of the potential benefits AI might bring. Insurance is ranked highest in the nervous or skeptical category (24%), while banking and capital markets leaders had the lowest levels of skepticism (17%), followed by wealth and asset management (21%).”
Advisors are also learning about how AI can benefit their practices. It’s a lot to consume and it’s worth it to compartmentalize AI the investment theme and AI the practice tool. One thing that these two issues have in common is that they’re rapidly evolving.
Today, it’s generative AI that’s the most the most accessible and that’s important because that’s AI genre that’s evolving with the potential to be meaningful in the financial services space. Data confirm executives and advisors are bullish to that effect.
“The majority of respondents felt positive about AI, with more than half (55%) saying they felt supportive and optimistic about using AI in their organization,” add E&Y. “The long-term sentiment is even more optimistic, with 77% of executives viewing GenAI as an overall benefit to the financial services industry in the next 5-10 years. Leaders see a particular opportunity in customer and client experience, with 87% stating that they believe AI can bring improvements to this space.”
Tips for Harnessing Power of AI
Over the past decade, the advisory business has become increasingly tech-centric and many practices have rolled with those punches, realizing client, cost and profitability benefits along the way. Similar aplomb should be considered regarding AI.
For advisors looking to make the most of this disruptive technology, commitments to education, embracing AI experts and a focus on the human touch are essential.
“Focusing on the human role of AI implementation is just as important as technology infrastructure," says EY Americas Financial Services Accounts Managing Partner Michael Fox. "Our data showed that 44% of leaders cited access to skilled resources as a barrier to AI implementation, but there's only so many already skilled professionals in existence. Part of the solution is deploying upskilling programs today that can equip your current workforce with the skills they need to help leaders and their business thrive in an increasingly AI-centric world."