Artificial intelligence has the potential to change financial services forever. And now more than ever, advisors seem poised to keep pace with the shift.
The attitudes, opportunities and barriers related to AI in asset management were the focus of recently published research from consultancy Accenture† Their “AI in asset management” research surveyed 500 financial advisors in the United States and Canada earlier this year to “reasonably assess their familiarity with AI and what problems, if any, there are when it comes to using this technology.”
What they found was an overwhelming enthusiasm and willingness for the still nascent technology, as nearly all consultants surveyed crave AI solutions and are already using AI to some degree.
About 83% of consultants interviewed said they believe AI will have a direct, measurable and consistent impact on the client-advisor relationship over the next 18 months. That same percentage of advisors also said they believe AI can reach a level of advanced advice and planning that will eventually see them compete with a client algorithm over the next 18 months.
Fifty-five percent of the consultants interviewed strongly believe that AI will have a transformative or revolutionary effect on the future of financial advice within the next three years, and 92% acknowledge that their companies have taken steps to act on their AI strategies.
Scott Reddel, North America head of wealth management for Accenture, said: Financial planning that companies today have a better understanding of AI and more sophisticated ways of deploying it so that advisors can extract value from it faster. He believes the industry has also improved on “proper use cases” and is focusing on exactly where and how AI can fit into their business models.
“I think these companies have gotten smarter about how they disclose these things to advisors. I think the story resonates a little bit more now,” Reddel said. “It’s not a ‘replace advisor’ solution. able to provide better people-led advice the way you want it.”
The warm reception of AI is getting stronger in 2022, but asset management decision-makers seemed ready to pounce on the technology in the pre-pandemic era.
In a survey conducted by Accenture two years ago, they found that 79% of North American C-suite executives in the wealth management industry believed their organizations were “digitally ready” to adopt new AI tools, while six in 10 already focused on deploying AI technology in targeted business groups.
Just a few years ago, Reddel said there was a belief in AI, but also a lot of hesitation and questions about its ability to really change the landscape. But that hesitation began to subside as more practical applications of the technology hit the market.
“I draw the analogy to digital and robo advice. When that first launched, every company and wire house looked at that first and said, ‘We can’t do this because our advisors get upset and we can’t cannibalize,’ he said. “And then it turned quickly… so that shift has kind of started with AI now.”
The statistics show a high degree of agreement between consultants and executives, and Accenture’s research indicates that this is a “somewhat unique scenario when it comes to implementing a new technology to find shared beliefs and interests among key stakeholders that be equally willing to change their work practices and learn how to use a new technology in the most productive ways.”
But challenges remain. For example, five out of ten consultants feel that their company is being challenged to act on their AI vision. Reddel said Accenture is working with companies to help them understand that moving to an AI and data-driven strategy also requires a mindset and culture change.
Yelena Melamed, Co-Founder and Head of Product at Catchlight Insights, said Accenture’s findings are consistent with what it sees in the industry. Made in Fidelity Labs — the software incubator for Fidelity Investments — and integrated with Redtail Technology earlier this yearCatchlight has developed AI-powered growth optimization technology to support asset managers.
By leveraging institutional data partners and analyzing more than 100,000 successful lead conversions, Cathlight’s technology can find leads most likely to need the guidance of an advisor.
Catchlight’s analytics allow advisors to link information to action, and according to Melamed, the power of AI goes from a high-level concept to something tangible and exciting.
“There’s a lot more advisor engagement and advisor leaning now,” she said. “Maybe it’s a better understanding of AI. Maybe it’s just realizing that the luxuries of better markets are behind us. And to be really efficient in the market to come, you have to rethink how you built your workflow in the past.”
Melamed said advisors in today’s market are hungry for meaning behind the data they’ve seen about AI for years and how to act on it. In the case of Catchlight, data is used to streamline prospecting by helping advisors quickly identify which leads lead to pitching and how best to engage them.
She adds that any AI-facilitated first client-consultant meeting makes more sense because so many early steps of traditional prospecting have been skipped.
“They realize this is a person they want to talk to, and this is someone who might be interested in and value their advice. They don’t kick tires. They’re not wasting each other’s time,’ Melamed said. “That’s a huge added value, if only from an efficiency point of view, and they can get in touch much faster.”
Melamed said it’s also a boon for companies battling to grab attention in an increasingly competitive, digital-first market where customer-adviser pairs are no longer limited by geography.
“It doesn’t just make you more effective. It also ensures that you stand out from the competition because you are engaged in a personal way. How many (financial) emails do we all get that look the same all the time? I tend to get a lot… and they just completely misunderstand me,” Melamed said. “A few data points that Catchlight can provide will make them much more effective, because it’s all about the eyeballs, and it’s all about the quality of the communication.”
To prepare for a more seamless AI tech rollout, Accenture recommends creating multidisciplinary teams by companies and tasked with implementation. A “smart implementation” model can keep a company’s pace of innovation using AI relative to the rate of adoption, avoiding inconsistency and headaches. Multidisciplinary, in-house teams are also likely to be more familiar with these specifics, making them best suited to manage this work.
The Accenture study also identified three critical factors to improve an asset manager’s ability to scale, overcome roadblocks, and help organizations realize the full potential of AI.
First, companies should focus on seeing a one-time use case or program through to the end. “Aim for an approach that is driven by a clearly defined business strategy, not technology,” the study says. Accenture warns that too many pilot or work-in-progress initiatives can lead to confusion and frustration.
Then make sure the company’s priorities align with where advisors find high value. Keeping financial advisors informed can facilitate an AI adoption process that requires a lot of change and effort.
And third, ensure continued management support to ensure the success of AI programs. Accenture believes executive sponsorship is critical to leading the way and ensuring that internal capacity, funding and commitment are sufficient to meet AI goals.
“This sends a strong signal that successfully scaling AI requires an operating model with defined processes and owners for measuring value, appropriate funding levels and established executive support,” said an Accenture statement.