Innovations in financial advice can cause existential anxiety among financial advisors who worry that new technology will negatively impact their work, or at least diminish their value. We have repeatedly experienced this hype cycle in financial advice, as emerging technologies tend to create anxiety for advisors by automating or changing the traditional processes and services they have traditionally managed.
Concerns about job security are understandable, but advisors cannot let them cloud the benefits technology has brought to the advice industry, especially the way it enhances the way advisors serve their clients. Technology has helped reduce costs and overhead for advisors by enabling efficiencies such as streamlining client onboarding and portfolio construction. And our ability to provide a more personalized experience for our clients has fundamentally improved, reinforcing the enduring value of coaching and mentoring from human advisors.
Fast forward to today, and the technology that is driving the headlines is generative AI. This rapidly evolving technology has the potential and potential to change the way we interact with almost everything, including financial advice. As GenAI becomes more prevalent in technology solutions across industries, advisors will benefit from considering GenAI's meaningful benefits and associated risks, rather than viewing it as a fad or a threat.
Evaluate GenAI’s potential as an advisor
There are many ways GenAI can provide value, but for advisors, the most notable is the way the technology can help streamline and enhance administrative tasks. Here are his top three benefits of timescaling that GenAI can provide advisors with the ability to prioritize more valuable tasks and help clients achieve their goals.
1. Content generation: GenAI can help generate content for everyday communications that advisors often spend time worrying about, including personalized communications such as standard client check-ins, meeting reminders, and market updates. We support the provision of
2. Knowledge management: Another core use case for GenAI for advisors is the rapid synthesis and extraction of large amounts of information. For example, GenAI summarizes comparisons between products to help advisors make informed decisions for their clients faster. Additionally, rather than spending hours parsing forecasts, long annual reports, and commentary to understand the latest market conditions and outlook, advisors can use GenAI to immediately highlight key points. You can summarize and transform those insights into value for your customers. GenAI can also help advisors distill previous interactions with clients into more understandable notes and prompts as they prepare for upcoming meetings.
3. Code generation: Just as GenAI can assist with day-to-day content development and drafting, it can also generate coding for web pages, allowing advisors to more quickly upload content to their websites for their clients. And for large advisory firms, GenAI-assisted code generation allows advisors and their software developers to quickly create custom technology solutions to support client onboarding and back-office operations such as data analysis, trading, and operations. will help you create it. We can also support your ability to more seamlessly integrate internal systems for CRM, trading, and portfolio management.
Evolving technology also comes with risks
GenAI comes with several risks if left unchecked, which makes having a human advisor even more important. While the time-scaling benefits of GenAI are appealing, advisors must have a framework in place to address risks, both to protect their operations and protect their clients' personal information.
For example, one of the risks is jumping into a GenAI-focused partnership without conducting sufficient due diligence. We are witnessing explosive growth in GenAI technology, with new tools and platforms emerging every day that seem relevant at face value. It is important for advisors to develop guidelines for vetting potential partners and their technology, focusing on their expertise, experience, clientele, and information security practices.
Another key risk that advisors should be wary of is a lack of awareness about the parameters of the GenAI platform they are operating. Although GenAI technology may be private, some platforms (such as ChatGPT) are publicly available, and so are advisors. Monitoring measures should be considered to ensure that confidential, proprietary, or customer information is not shared.
Finally, advisors should develop processes to identify risks related to hallucinations and bias. Hallucinations can occur when AI is asked to answer questions it was not trained to answer. Instead of not answering questions, the AI can hallucinate and give false responses that sound convincing. Furthermore, GenAI tools can also be subject to racial and gender bias. For example, GenAI may recommend a lower investment risk tolerance for women, regardless of their actual risk preferences. It is important that advisors understand the source data behind the AI they are using and have a plan to check for unforeseen illusions and biases that could perpetuate bias and stereotypes.
With GenAI, advisors can more effectively manage their rarest and most valuable asset, their time, and focus more energy on creating personalized experiences and building deeper relationships with their clients. You can Vanguard research shows that relationship-focused service is a key differentiator in delivering value to clients, and value increases as advisors establish emotional trust. Advisors who welcome technology and incorporate it wisely have the potential to deliver better outcomes for their clients.
Lauren Wilkinson is a principal at Vanguard and the chief information officer for the company's Financial Advisor Services (FAS) division.
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