Financial advisors who are concerned that advancements in technology may have a negative impact on their profession—or potentially diminish their significance—sometimes find themselves grappling with existential anxiety in light of the evolving landscape of financial guidance. This cycle of enthusiasm and apprehension is a common occurrence in the financial advisory realm, where the emergence of new technologies often induces unease among advisors by automating or altering the processes and solutions they traditionally handled.
While apprehensions about job security are valid, advisors must acknowledge the advantages that technology has brought to the advisory sector, particularly in enhancing the ways advisors cater to their clients’ needs. By offering efficiencies such as streamlining client onboarding and portfolio management, technology has helped reduce costs for experts and improved their ability to deliver a more personalized experience to clients, underscoring the enduring value of personalized coaching and guidance from individual advisors.
Looking ahead to the present day, artificial intelligence (AI) is the cutting-edge technology making waves. This rapidly evolving technology holds the potential to transform how we engage with various aspects of life, including financial advice. Rather than viewing it as a passing trend or a threat, advisors may benefit from embracing the significant advantages and associated risks of incorporating AI into tech solutions across the industry.
Evaluating the Suitability of GenAI for Consultants
GenAI offers several benefits for professionals, particularly in simplifying and enhancing administrative tasks. Here are three time-saving advantages that GenAI provides advisors, enabling them to focus on more critical aspects of assisting clients in achieving their financial goals:
1. Content Creation Assistance: GenAI can aid in generating content for daily communications that advisors often spend significant time deliberating on, facilitating the delivery of personalized communications such as regular client check-ins, meeting reminders, and market updates.
2. Information Synthesis: One of the key applications of GenAI for experts is the rapid synthesis and distillation of vast amounts of information. For instance, GenAI can summarize product comparisons, helping advisors make informed decisions swiftly for their clients. Rather than spending hours analyzing projections, lengthy annual reports, and market updates, advisors can leverage GenAI to quickly extract key insights and translate them into value for clients. As advisors prepare for upcoming meetings, GenAI can assist in condensing previous client communications into concise notes and prompts.
3. Code Generation: GenAI can generate webpage code, enabling advisors to efficiently publish content on their websites for clients, as well as aid in the development and drafting of daily content. Moreover, GenAI-assisted code generation can expedite the creation of custom technology solutions that support advisors and their software developers in tasks such as client onboarding and back-office operations like data analysis, trading, and portfolio management for larger advisory firms. Additionally, it can facilitate the seamless integration of in-house CRM, trading, and portfolio management systems.
Navigating Risks Associated with Technological Advancements
Despite the time-saving benefits of GenAI, there are risks that underscore the importance of having human advisors in the loop. Advisors must establish frameworks to mitigate risks and safeguard both their expertise and clients’ confidential information.
One risk involves entering into a GenAI-centric relationship without conducting thorough research. With the rapid growth of GenAI technologies and the emergence of new tools and platforms, advisors must develop protocols to evaluate potential partners and their systems, focusing on factors such as expertise, experience, client base, and data security measures.
Another critical risk to watch out for is the potential lack of understanding of the GenAI system being utilized. While some GenAI technologies are proprietary, others, like ChatGPT, are public. Advisors should implement oversight measures to prevent the inadvertent sharing of sensitive or proprietary client information.
Lastly, advisors should establish protocols to identify and address risks related to biases and hallucinations. When faced with a question outside its training scope, AI may experience hallucinations, providing incorrect yet seemingly plausible responses. Gender and racial biases can also influence GenAI systems, leading to biased recommendations. Advisors need strategies in place to mitigate unforeseen biases and illusions that could perpetuate stereotypes or prejudices, as well as a thorough understanding of the data sources underpinning the AI they employ.
By leveraging GenAI, advisors can optimize their time—their most valuable and finite resource—and concentrate on cultivating personalized experiences and strengthening client relationships. Vanguard research highlights the significance of relationship-oriented services in delivering value to clients, emphasizing the growth in value as advisors build trust with clients. Advisors who embrace technology and utilize it judiciously can achieve better outcomes for their clients.
Lauren Wilkinson serves as the chief information officer for the Financial Advisor Services (FAS) division at Vanguard and is a principal at the company.
