The Competitive Advantage Artificial Intelligence Gives RIAs

Top ways advisors plan to use AI over the next 12 months are centered squarely on serving their clients

401k, artificial intelligence, technology, RIA, advisorsWhat will the future bring?

Stephen Hawking, Elon Musk and other visionaries warn of a dystopian future ruled by robotic overlords, yet (at least for now) artificial intelligence is here and making a major impact in the advisory space for those who use it.

Two-thirds of RIAs and fee-based advisors say artificial intelligence will give them and their firm a competitive advantage in the financial industry.

“Advisors are using artificial intelligence to transform every aspect of the customer experience, attract a new category of future clients and open the door to an entirely new universe of products and solutions,” a new Nationwide Advisory Solutions’ study finds.

It adds that while AI can enhance human advice, it’s not likely to replace it, as investors continue to place a premium on trust, face-to-face communication and a personal one-on-one relationship.

Adoption Low—But Poised to Grow

Artificial Intelligence uses advances in machine learning, including refined algorithms, predictive analytics, natural language processing, speech recognition and image recognition to assess big data from disparate sources, evaluate complex problems and help advisors make more accurate decisions.

While adoption of AI is low, more than half of RIAs and fee-based advisors who are at least somewhat familiar with AI (51 percent) plan to integrate or expand its use in their practice over next 12 months.

Profiling the Early AI Adopter

Meanwhile, among the early adopters, nearly nine in 10 have added AI into their practice in past 12 months—and over eight in 10 plan to add more over next 12 months.

These early adopters, when compared to RIAs and fee-based advisors, are far more likely to say their profitability will increase substantially in 2018—and more likely to say their financial outlook for 2018 is very optimistic.

They are also more likely to be among the categories of high AUM advisors who manage over $250 million, and high-earning advisors with income of more than $500,000.

Improving the Advisor/Investor Relationship

Among investors, advisors, and early adopters who believe that AI will improve the advisor/investor relationship, there is alignment.

All three groups say that the top ways AI will improve this relationship include increasing accessibility and affordability of financial planning, and making accurate predictions about clients’ future needs and behavior.

Top Ways of Using AI

The top ways advisors plan to use AI over the next 12 months are centered squarely on serving their clients.

RIAs and fee-based advisors say this includes:

  • protecting clients’ assets against market risk,
  • improving their understanding of clients’ current needs and behaviors,
  • predicting clients’ future needs and behavior, and
  • using AI to provide more personalized, holistic financial planning.

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