AI may not be taking over your job, but it’s definitely getting a promotion.

Vanguard became the latest financial services firm to launch new artificial intelligence technology: this time, a portfolio analysis tool designed to turn large datasets into client-facing analysis. Advisors just have to upload a portfolio, and the machines do the rest, generating insights as well as handling tasks including stress testing, building healthcare cost projections and making Social Security optimizations. It’s all part of a wave of new tools that are evolving from AI assistants that handle note taking and transcriptions into ones that can help make decisions about portfolio management and more.

“We are putting the expertise of our portfolio analysis specialists directly in advisors’ hands,” said Sid Ratna, Vanguard’s head of digital and analytics for financial professional services.

Commence Phase 2

The Malvern, Pennsylvania-based company has an AI master plan that’s built around three distinct stages: assisting, augmenting and acting. Right now, most advisors are firmly in the first phase, where AI is helping with efficiency by drafting emails, summarizing meetings and taking over some of the grunt work. Those types of tools can save hours of time during meetings, said Jason Pereira, CFA, and a financial planner at Woodgate Financial. “There are all sorts of other kinds of things that need to be done,” he said, adding that AI has helped him audit and compile data into reports in hours instead of the days required previously.

In fact, industry surveys show the vast majority of advisors are already saving time, with many increasing client capacity within just a few months of adopting the tools. And, with the new launch, Vanguard may be getting close to actually augmenting the advisor, instead of simply offering a glorified assistant. “This is where AI starts to play a deeper role in portfolio construction and financial planning, surfacing insights and recommendations that go beyond basic task management,” Ratna said. Still, “advisors make the final call.”

A tsunami of new third-party tools, like meeting assistants and notetakers, have already gained traction in the wealth management industry this year:

• Merrill Lynch launched a client meeting tool in March that it claimed saves four hours per meeting.
• The wealthtech talk of the year, however, was the launch of Altruist’s new AI tax agent that literally moved the market in February.

Vanguard’s Vision. One day, the firm envisions AI actually taking actions on an advisor’s behalf, all within defined guardrails, of course. It’s potentially transformative, but also … a long way off, according to experts. It seems the robots aren’t replacing advisors just yet, but they could help them achieve Inbox Zero every once in a while.

“The biggest challenge right now isn’t so much what needs to improve because we’re seeing it improve on almost a daily basis,” said Pereira. “The biggest challenge is just keeping up to date with everything that is going on, and figuring out how to adopt, and adapt, these new technologies.”

Once a Boglehead, always a Boglehead.

Christine Benz, director of personal finance and retirement planning for Morningstar, is a proud member of the Boglehead movement, a popular investment philosophy based on the teachings of Vanguard founder John Bogle. Self-professed “Bogleheads” emphasize long-term wealth building through simple, low-cost and diversified index fund investing. The community focuses on minimizing fees, ignoring market noise and staying the course.

Benz’s enthusiastic participation in the Boglehead movement helps explain her reaction to the recent proposal by the Department of Labor to help “democratize” access to private assets like private equity, real estate and digital assets in 401(k) plans. That reaction was decidedly “meh,” especially factoring in the potential for higher fees after years of falling plan costs.

“401(k) plans have gotten meaningfully better over the past few decades as they’ve gravitated toward index funds, target date funds and smart defaults,” Benz said. “The new proposal doesn’t seem intended to build on those successes in any way.”

Benz unpacked her reaction in a recent post on Morningstar’s website, where she points to four other pressing pain points that, in her view, should take precedence over the policy push for private assets in defined contribution plans. These include a lack of universal access to 401(k) plans, a serious difference in quality between large and small plans, challenges for job changers to remain on track, and a dearth of support for income planning.

“It’s true that many workers are hurtling toward retirement with inadequate savings,” Benz said. “But this proposal seems more like a gift to what I call the ‘financial complexity complex’ than it is a boon to workers.”

That said, Benz believes the rulemaking’s asset-class-agnostic framework for more clearly defining prudence in the 401(k) plan investment selection process may prove helpful in stemming litigation filed against well-meaning plan sponsors under the Employee Retirement Income Security Act. Nonetheless, there’s a real risk that allowing 401(k) plans to add complicated, higher-cost investments to their menus is a step backward, and it detracts from what really matters. Benz sat down with Advisor Upside to chat about alternatives, the proposed 401(k) rule changes, and the current state of retirement income planning.

Read more.

Just like He-Man, Ives has the Power!

Wedbush Fund Advisers and tech analyst Dan Ives launched their second AI-focused ETF yesterday: the Dan Ives Wedbush AI Power & Infrastructure ETF (IVEP). The fund targets the energy, data center and raw materials companies driving the AI wave, including companies like GE Vernova, Siemens Energy and Eaton Corp. The new product follows the firm’s first AI fund, the Dan Ives Wedbush AI Revolution ETF (IVES), which focuses on software and consumer tech giants such as Apple, Amazon and Nvidia. “This [new fund] is all about the power and energy fueling the AI revolution,” Ives told Advisor Upside. “The AI arms race does not happen without power.”

While broad market index funds have exposure to AI infrastructure stocks, sector-specific funds have been performing exceptionally well this year. “Advisors who want real conviction in the AI trade need a dedicated vehicle, not a watered-down version buried inside a broad index,” CEO Gary Wedbush told Advisor Upside.

AI-natomy 101

Wedbush estimates that US data center electricity consumption could reach about 470 terawatt-hours by 2030, about nine times as much electricity as New York City uses in a single year. “As AI adoption accelerates, energy and infrastructure are emerging as critical bottlenecks,” Cullen Rogers, chief investment officer at Wedbush, said in a statement. “Every dollar spent on AI ultimately requires energy.”

So far this year, AI infrastructure funds have been riding high:

• Tortoise AI Infrastructure ETF (TCAI) has surged almost 30% with assets of a little less than $100 million.
• Global X Data Center & Digital Infrastructure ETF (DTCR) has jumped roughly 21.5% with $1.2 billion in assets.
• Defiance AI & Power Infrastructure ETF (AIPO) is up about 20%, holding roughly $250 million in assets.

“Software and infrastructure are the lungs while utility providers are the hearts,” Ives said.

Name Recognition. “A big person, who has a big platform, usually has success in the ETF market,” said Eric Balchunas, senior analyst at Bloomberg Intelligence. He pointed to the accomplishments of the IVES fund, which comes with an expense ratio of 0.75%, and has jumped nearly 18% while gaining $883 million in assets since its launch last June. However, he also said, “It’s harder to get money in the sequel, just like the movies.”

Balchunas pointed to the Fundstrat Granny Shots US Large Cap ETF (GRNY) from financial analyst Thomas Lee, which has amassed nearly $4 billion in assets. Meanwhile the two funds Lee launched afterward have just over $400 million in assets between the pair. “Being Dan Ives helps,” Balchunas said. “If it’s from a person named Joe Schmo, I would be bearish.”