With the introduction of programs like ChatGPT and Google's Gemini, the integration of artificial intelligence into the advisor technology stack has become a hot topic of discussion in the financial advice community. Although the advent of generative AI applications signals a new era in the evolution of AI, it is worth noting that much of the underlying technology has been around for decades. Advisors, knowingly or unknowingly, have been taking advantage of AI for quite some time. In this context, counsel Justin Castelli notes, “There is a seemingly exaggerated fear of AI from the advisor community.”
Despite the apprehension many advisors feel towards this technology, the truth is that AI is already an integral part of their daily tasks. Moreover, the advent of generative AI brings more opportunities than threats. To help advisors overcome their hesitation about this new frontier, we aim to clear up some common misconceptions and explore how AI serves as a co-pilot rather than a replacement.
Busting AI myths
Financial advisors hold many misconceptions about AI, which risk obscuring the true potential of this transformative technology. At one end of the spectrum, there is a segment of financial advisors who believe AI will not directly impact their work, underestimating its growing impact on the industry.
However, the data shows a different reality. According to Hostinger, 35% of companies are already using AI in their current business model, with financial services demonstrating one of the highest adoption rates.
Conversely, on the flip side, some advisors envision a doomsday scenario, fearing that AI could make them obsolete. This concern, however, overlooks the inherent limitations of AI. While AI excels at tasks such as pattern recognition, it lacks the human intuition that is essential for nuanced financial planning, including the ability to interpret a customer's facial expressions and tone. AI's inability to 'read the room' underscores the irreplaceable value that human advisors bring to the table.
There is a common belief among some experienced advisors that they are 'too old to learn AI'. This notion is unfounded, as counselors of all ages can and should use tools such as ChatGPT. With AI becoming increasingly prevalent in areas ranging from fraud detection to estate planning, it is essential that advisors of all generations adapt to stay competitive. While concerns about security are understandable, as with the adoption of any new technology, generative AI can indeed be safely integrated into a practice with proper care and implementation.
HE is already in the water in which we are swimming
Artificial intelligence has played the role of advisor co-pilot since long before AI generating tools got so much attention currently. Let's talk with some examples. For one, almost every advisor has technology in their suite that helps them with forecasts and predictions. Machines are great at spotting patterns and trends, and so AI features of this type reside under the hood of almost all predictive models and similar tools. Another example would be optimization. The robo-advisor solutions available in today's market rely heavily on AI for automated portfolio optimization, showcasing another practical application of this technology in the financial advisory profession.
Search has also been heavily influenced by this technology long before ChatGPT came on the scene. Advisors who engage in paid advertising on major social platforms like Facebook and LinkedIn are essentially using AI-driven tools. These leading social media platforms use AI to determine the best audience for a given ad, once again appearing as the advisor's teammate, not their competitor.
Recently, the integration of AI into estate planning is serving to transform the process into a more efficient and customer-centric experience. Advisors can now use AI to quickly upload and summarize key estate planning documents, providing clarity for both advisor and client. Some platforms also offer the ability to intelligently incorporate previous customer actions into their instructions, simplifying the updating of essential documents. This serves to ensure that wills, trusts and other important documents accurately represent the client's current intentions and life circumstances, while preserving their legacy.
Why Generative AI is really hype-worthy
For advisors, generative AI has the potential to provide countless additional benefits beyond existing applications. Unlike traditional AI, which is designed to perform specific tasks using predefined algorithms and rules, generative AI introduces the ability to create original content, including text, images, audio, and more—skills that advisors must welcome with all their hearts. This technology can improve efficiency in administrative tasks such as drafting client communications, summarizing large amounts of important information, identifying the best tools to educate clients about various financial planning concepts, and much more.
Just as the Internet revolutionized the profession, AI offers similar transformative potential, increasing productivity and enabling advisors to devote more time to client-centric activities. With the right safeguards in place, advisors can use generative AI to streamline processes, improve decision-making, and increase client satisfaction. It doesn't have the ability to replicate the personal engagement advisors are known for, especially in understanding and navigating the emotional and complex needs of clients in areas like estate planning, but AI serves as an invaluable complement to these essential human skills.
Adopting generative AI enables advisors to redefine their service offerings, highlighting the value of personalized advice in an increasingly automated world. This technology should be considered an extension of the advisor's capabilities and a value multiplier, facilitating a shift toward more strategic and meaningful interactions with clients. As advisors harness the power of generative AI, they not only streamline their processes, but also underscore their commitment to providing exceptional, client-centric advice. When viewed through this lens, it's clear that generative AI is more of a co-pilot than a competitor.
Rafael Loureiro is co-founder and chief executive of Wealth.com