Q: Where do RIAs benefit from using artificial intelligence and machine learning?
JIM STARCEV: In predictions, especially in trends toward prospecting. Advisors are getting lists of potential clients with information about who they are — even how likely that person might have held-away assets. The customer relationship management systems contain quite a bit of information and that translates into a lot of data for firms. How firms start analyzing client data to form predictions about behavior is what will drive value in the future. We see this baked into so much of the investment data that’s been pouring in. How good will data be in managing relationships?
Where will technology be most disruptive in wealth management?
There are the buzzwords — like blockchain and machine learning — which are going to be disruptive, but it’s going to be behind the curtains. The next stage will be to make the tools we already have more efficient and pop. For example, machine learning can do intimate analysis on free-written comments on client surveys to gain deeper insights into those responses. Blockchain, which is essentially a ledger, will allow advisors to better open accounts for clients and track transactions making the entire investment process simpler. It will depend on how it’s implemented. But it will be behind the curtain. It’s not the new client-facing tech that advisors have to have. Tech disruption has the potential for all sorts of implications that people won’t even notice.
What has held back innovation?
The ability to merge and handle data, opening up application programming interfaces and sharing that data is getting better. But I’m surprised we haven’t seen the bigger jumps in the past 10 years. Machine learning and AI is starting to pop up, but they are still building through a lot of legacy systems and sometimes it’s just not that easy to talk to each other. How do you unwind all of that tech? Consolidating all the processes and data into a single place has made advisors’ lives better, but it’s still a job. Nobody has done it seamlessly.
What new tool do advisors need most?
Video conferencing is at the top of that list. What video can do to enhance client communications — even in terms of what a newsletter can do — is just vastly different. We’ve gotten so inundated with phone calls and emails. Email penetration is a nightmare at this point. These tools can create an enhanced experience for clients, which has proven to help build out those relationships.
Will massive tech firms — like Amazon and Facebook — enter wealth management?
In the sense these big companies control a lot of data, I would look at what Amazon and Facebook can predict about consumers just from what they already know. How easily can that information be converted to manage financial decisions? But, there’s also an inherent lack of trust that has come about with massive tech companies — Facebook would be the poster child. People are starting to feel leery about how companies are managing data, and when you move into the money side, trust just becomes such a critical element. If they do move into wealth management, it will take some time to earn that trust.
How is technology helping enhance the client relationship?
We’re seeing just how important client communication is. Clients want to feel that they are being communicated to and are on the right path. The industry is starting to shift over to the client experience. That’s what really matters for the most successful firms. We’re seeing just how important client communication is. The number one quality clients look for in an advisor is how well they listen. And that’s driving a change in how advisor manage their businesses.
