How Advisors Can Avoid Becoming Over-Reliant on AI

Apparently there’s no AI in team.

Artificial intelligence is being hailed as a key element of the fourth industrial revolution, and new tools are now assisting financial advisors with taking notes, drafting emails, and brainstorming thought leadership content. In fact, the vast majority of advisors said generative AI helped their practices, according to a survey earlier this year.

But AI isn’t a silver bullet. It lacks emotional intelligence and a human touch. Advisors risk damaging client relationships if they become too reliant on automation — even for routine tasks. “AI is poor at empathy so far,” said Adrian Johnstone, CEO of the CRM platform Practifi. “Advisors need to recognize where the personal connection is most powerful, and use AI to automate and alleviate the lesser functions.”

Keep it Personal

Today, most advisors use AI to boost meeting efficiency and streamline workflows. Ideally, this frees up more time to spend with clients, but misusing these tools can backfire. “The common refrain of disaffected clients is: ‘I pay you to understand me, my goals, and my fears, not to outsource me to a machine,’” Johnstone said.

Wealth management is built on bespoke service, but AI hasn’t yet learned to fully adapt to individual client needs and goals. While tools that draft emails and website content are improving, the output still reads “hollow and generic,” Johnstone warned.

Use it or Lose it. Client-facing AI tools can be “extremely risky” because they can’t interpret emotional undertones of client’s concerns, said Rafael Loureiro, CEO of Wealth.com, an estate planning platform. Still, AI can be useful for quick, factual tasks. “If it’s midnight on a Sunday and a client asks, ‘What was my marginal tax rate last year?’ that’s a perfect use case,” Loureiro said. “It’s not doing financial planning, but answering factual questions.”

Everything in Moderation. This isn’t the first time new tech or strategies meant to disrupt the wealth management industry have wound up causing trouble for advisors and their clients. Will Trout, director at Datos Insights, pointed to the 2008 financial crisis as a warning. “Firms that over-relied on risk models without human oversight suffered catastrophic losses,” he told Advisor Upside.