As the wealth management industry is beginning to adopt new AI tools, the old adage of whether such technology will take human jobs has crept in.
But there's also a counter evolution playing out: AI needs more human advisors to teach it and grow with it.
A new MIT study suggested that while large language models (LLMs) like ChatGPT are fairly new developments for advisors, they could be trained to adapt to simulate both the predictive and empathetic behaviors of human advisors.
"Human financial advisors start their careers as trainees under the mentorship of more experienced professionals. Over time, through positive and negative feedback from their mentors and clients, these trainees turn into successful professionals (or not, in which case, they may leave the industry)," said the study led by co-author Andrew Lo, a professor of finance at MIT Sloan and director of the MIT Laboratory for Financial Engineering, along with several students. "However, to achieve performance that rivals the best human advisors, we will need to incorporate some notion of selection, evolution, and fitness into the ongoing training of LLMs."
Large language models have become a popular entry point for advisors into AI because of the free and easy-to-use tools like ChatGPT. A recent survey by Financial Planning found that
"Whatever can go wrong will go wrong and will go wrong faster and bigger when computers are involved. For this reason, LLMs may not be embraced as quickly in the financial sector as it has in others," the study said. "However, if LLMs can be made safer and more robust, they have the potential to transform our financial lives."
A growing number of software providers have been fine-tuning these large language models to the advisory industry.
For example, digital admin platform Arch launched an updated investments platform on April 15 that included AI-language tools, such as having a button in its portfolio platform where the user can click to see an AI-produced summary of performance, or a summary interpreting extensive tax documents and investor letters.
"The whole purpose and reason for [AI] existing is to solve the operational problems and automate the work that needs to be done to manage short-term investments and give you better data to make better decisions about trends," said Ryan Eisenman, CEO of Arch, based in New York City.
When it comes to whether AI could develop fast enough to replace an advisor, Eisenman said it's no different than when the dishwasher or laundry machine was developed: "We still find a way to fill our time with productive things," he said.
Just getting to the point where Arch has implemented more advanced AI capabilities has taken more people. The platform, which started six years ago by three founders — including two MIT graduates — has grown to more than 80 employees and 230 clients, Eisenman said.
"Hopefully, it'll allow us to spend more time on strategy, creative tasks, places where you can have impact," said Eisenman with regard to AI's capabilities. "And there will always be work to be done. I think with efficiency, we can do more and have better outcomes."
Job growth specifically in the personal financial advisor industry is projected to have a 13% spike through 2032, far exceeding the 3% average for all other industries, according to the U.S. Bureau of Labor Statistics. Part of that growth is likely to be fueled by AI developments across the wealth industry.
During a quarterly earnings call with investors on April 16, BNY Mellon's CEO Robin Vince said the company's employees have "identified hundreds of use cases" for AI tools across the firm "and we already have several in production today."
"To that end, we're investing in our people," he said. "Over the past several months, we launched new learning and feedback platforms powered by AI, expanded employee benefits, launched a new wellbeing support program, improved and accelerated our year-end feedback and compensation processes, and more."
READ MORE:
Beyond the people needed to implement and train AI technologies, there's a potential for more job growth on the back end, after AI has created enough efficiencies to generate more assets, or clients, to manage. This means more human advisors will be needed, observers said.
"It's going to help the advisor, and it's going to create efficiencies and process changes that will benefit the advisor," said Christopher Marsico, chief financial officer and a partner at Rossby Financial, an open-architecture RIA platform based in Melbourne, Florida. "And I can see where you get to a point where you're going to need more people."
