Financial advisors can use generative artificial intelligence to help them achieve “personalization at scale” within their practice. Now, we are in the implementation phase, said the speakers at WealthManagement.com's RIA Edge West Conference in Marina del Rey, California.
“The good news is that customization at scale is here,” said Jason Pereira, senior partner and financial planner at Woodgate Financial. “The bad news is that it's going to further commoditize the work that we do because, frankly, the faster everything gets done, sooner or later somebody takes those efficiency gains and basically tries to lower the cost of entry into these kinds of things, creating pressure on margins and trying to make up the difference in volume.”
Pereira and Brian Portnoy, founder of Shaping Wealth, presented a framework for delivering personalization at scale. It involves a combination of people and technology.
Pereira gave a number of examples of AI-based technologies that advisors can use to do this, including ARQA, Holistiplan, Wealth.com and Focal.
He referenced a Kitces.com study that found the average advisor spends about 26.7 hours per week on customer service needs. With the exception of 8.8 of those hours spent meeting with actual customers, the rest of that pie is up for grabs, meaning those tasks can be improved through AI.
“Everyone is trying to understand personalization at scale, which means you care deeply about your customers and want to serve them well,” Portnoy said. “You want personalized advice, deeply human advice. But if you're not growing, you're shrinking.”
The modern counselor wears two hats, as mechanic and guide, Portnoy said. The mechanical role is the technical side of the business, including all dimensions of financial planning, investments, insurance, property, selling a business and planning for retirement. These mechanics represent 93% of the CFP curriculum.
The guide focuses on the human side of money. In 2021, 0% of the CFP curriculum was devoted to the psychology of financial planning. Now it is 7%. This is the aspect of a counselor's role that AI cannot fully take on.
“Guides help other people navigate uncertainty and change,” Portnoy said. Ultimately, you're helping people walk the path to what I call 'funded happiness' or 'real wealth'—the ability to secure a life that's meaningful to you.”
One aspect of being human is emotional intelligence, he said. And there are four dimensions of EI: awareness, self-management, empathy, and social skills.
Empathy is a big part of what counselors do as guides for their clients. He defined “empathy” as trying to understand the emotions someone else is having.
“Being empathetic – you're creating a space where you're listening; it's believing something when someone tells you it's true; and is asking good follow-up questions. It's basically the ability to take the point of view of others,” he said.
Can AI be empathic? “Yes-ish,” argued Portnoy. There are three dimensions of empathy: cognitive, understanding the perspectives of others; emotional, the ability to feel the emotions of another person; and experimental, which continues to show sensitivity. He said that AI is very well done in the first dimension.
“If you've had a conversation with AI and let it flow, you feel seen and heard. This is cognitive empathy that feels pretty good,” he said.
It can also follow. It can take tone, feelings and emotional cues. Can provide context appropriate answers. She has perfect memory and uses reflective listening techniques that we will teach in a training program.
“Many of the things we associate with empathy, AI already does quite well. And by the way, it's not like technology is going to be that bad again.”
Emotional empathy, however, is difficult for AI.
Can we use AI to better train empathy? Yes, Portnoy said, we can use it to improve our skills as guides, and therefore shift the conversation from 'personalization at scale' to 'humanization at scale'.
Take Lydia, for example AI Assistant that Shaping Wealth has developed in partnership with Alai Studios. Lydia can help counselors prepare for meetings and mock up a psychological profile of clients. The tool can also assist advisers in discussions with clients,
Including tips for navigating difficult conversations, behavioral marketing, and the connection between money and happiness.
“Will AI put us out of business? Of course not,” said Portnoy.
But it creates an opportunity for advisors to expand their margins and become more competitive by deepening client engagement.