Artificial intelligence is expected to transform the way companies do business, including those in financial planning and investment management. That means financial advisors need to get onboard or risk being left behind. “They have to realize an AI apocalypse is coming,” said Craig Iskowitz, CEO and founder of Ezra Group, a strategy consulting firm to asset managers and broker-dealers. Of course, financial advisors have been using some technology, like financial planning software, for years. Others are now embracing AI to help with operational workflows, such as meeting summaries and emails. Yet experts expect a dramatic shift as AI eventually becomes more entrenched in the day-to-day investment process. “Large language models, such as OpenAI’s GPT and Anthropic’s Claude, can deliver significant productivity gains because they can process vast amounts of text data, such as annual reports, debt documentation, news articles, or broker research, much faster than humans,” Vincent Gudsdorf, head of AI analytics and digital finance research at Moody’s Ratings, wrote in a report earlier this month. “These models can automate the creation of documents like earnings reports or market commentaries and generate investment ideas,” he added. Right now, AI is still in its infancy as infrastructure is built out, said Leo Kelly, founder and CEO of private wealth advisory firm Verdence. His firm has just under $4 billion in assets under management. “There are applications but they are very rudimentary and people don’t know how to use them yet,” he said. Those he calls “deniers,” who don’t want to embrace AI, will be fine in the early stage, Kelly said. But “the light at the end of the tunnel is a freight train [aiming] for them.” There are also early adopters, who may be rushing into the technology and could see challenges down the road, and those who are thinking strategically and building out their technology, he said. The latter will be the most successful, said Kelly, whose firm is currently rebuilding its technology stack. “We are basically getting our arms around our data and organizing and structuring our data in a way that it is clean and precise,” he said. “Then you can take AI and start applying applications and those applications will be highly effective if you have taken your time.” It is a massive commitment, he noted. “The payoff will be huge if you do it right,” he added. AI ‘wealth whisperers’ Eventually, regulators will get their arms around AI and understand that the data is protected, predicted certified financial planner Timothy Welsh, president of wealth management consultancy Nexus Strategy. Then, the conversation among investors will go from “who is your money manager” to “which AI are you using?” he said. “If you think about creating asset allocation and picking stocks, bonds [and] mutual funds … [financial advisors] are relying on intelligence from the asset managers of the world,” he said. “But that research is the core stuff that AI can do more than humans.” Still, AI will help financial advisors do their jobs better — not necessarily put them out of work. Welsh envisions advisors having more time to talk with their clients. “Therapist kind of stuff,” he said. “Those skills are way more in demand.” AI tools can also dramatically enhance background searches, data analysis, portfolio analysis and risk analysis for financial professionals, Kelly said. “All of this work they can do radically faster than they used to,” he said. “They can take in more data and make better decisions.” Iskowitz at Ezra Group sees AI leveling the playing field in what he calls the “democratization of EQ,” or emotional intelligence. All the data now available on the internet, like social media posts, will help advisors learn more about their clients and therefore help them relate better, he predicts. “The real golden ticket is going to be in gathering terabytes of data and sifting through it intelligently and coming up with pattern matching,” he said. “That’s called machine learning, but doing it much quicker and over much more unstructured data … emails, notes, social media, posts, videos that AI can quickly review and then drill down and distill the exact insights for each prospective client.” AI can also help managers analyze which clients to pursue and how to speak with them based on their backgrounds, he said. In about two years, Iskowitz predicts a chatbot will be able to provide full financial plans directly to clients, interact with them and give them the option to open accounts with the click of the mouse. “[It] will do all the work for you, put you in the right models, adjust it all and go,” he said. “These AIs are going to be like wealth whisperers.” What to do Nexus Strategy’s Welsh believes financial advisors should begin getting comfortable with current AI capabilities. “Get started today. This is something you can get ahead of,” he said. “Just keep it in the box right now — operational efficiencies. There is no issue with that.” For Verdence’s Kelly, the first thing advisors should do is ask themselves who they are — an early adopter, a denier or a strategic thinker. “Don’t try to fool yourself into that answer,” he said. “If you want to change things, you have to change.” They should then evaluate where they are in the marketplace — what are their competitive advantages and disadvantages. After that, decide if you need to invest in the people and technology, partner with a larger firm or, if you work at a big bank, decide if you want to leave since the big banks have to also manage risk and the capability of these AI tools, he said. Those who run small mom and pop firms managing their own portfolios should start thinking about partnering with a larger financial advisor firm or technology company, Kelly said. Otherwise, “AI is going to monetize you out of business,” he said. Iskowitz suggests advisors branch out and also go into areas like alternative investments, tax and estate planning, more advanced retirement planning, insurance and annuities. They can also use more visual tools, like an asset map that does a visualization of a client’s financial life, he said. Advisors should have regular conversations with their technology vendors, who are already hard at work deploying AI features, he advises. “Don’t go and buy anything new. It’s already coming to you. Just wait,” he said. “Your financial planning software is launching AI functionality. Your meeting organization tools are launching a functionality.” Also, make sure you train your internal staff and let them know no one is getting fired, he advised. Anyone whose work is being replaced can be moved elsewhere in the company, he said. “It’s a learning curve. Like any software, you need to spend time to train your staff and train them in the ways that they feel comfortable,” he said. “AI can help you.”
