Artificial intelligence is not magic, and the advisory industry is early in its exploration of its use in investment management and client service, said Howard Getson, president and CEO of tech consultancy Capitalogix in Coppell, Tex.

In fact, to date only Morgan Stanley has jumped in with both feet, and a serendipitous relationship with OpenAI, the tech company that launched ChatGPT last November, has the two firms creating a bespoke AI solution that scans Morgan Stanley materials only for use by advisors and staff.

For everyone else, how, when and what an advisor adopts in AI is going to vary, Getson said.

“It’s about incremental progress toward the inevitable, and let me tell you, AI is inevitable. It is going to change everything,” he said, speaking at last week’s Advisor Growth Summit sponsored by Financial Advisor magazine. “Automated trading, risk management, looking at sensible diversification, finding new opportunities, playing offense, playing defense, using it to review insurance policies to figure out where you’re missing coverage—so many different things. But the point is you’re early.”

Getson said that while everyone is currently talking about ChatGPT, that’s just one of the ways AI can be harnessed, and the pace of change is so fast in this field that soon there will be many other options that all do slightly different things.

So while ChatGPT is exciting, he said, it’s just a tool and just a single point in time. The rapid evolution of the AI technology behind the ChatGPT tool is what is going to have significant impact on all businesses, including the advisory business, he said.

“AI is going to radically change the way you work, the way you live, even how long you live, and not least of all your practice,” Getson said, adding that advisors who might feel behind on this particular technology don’t have to worry. “You’re not behind. You don’t need to have fear of missing out. You don’t have to think about ‘How do I do that thing that somebody else said they could do with it.’ The tool is going to get better and better and better.”

With this technology, he said, advisors need only take steps in the right direction, keeping the focus on what they want and the ways this technology will be able to help them get it, and not obsessing about what the “ideal” looks like.

For a lot of advisors, he said, that focus will remain on their client relationships, as less than 10% of the value of AI to the advisor community is in the base technology. The real value is that it will free advisors to focus on the things that create the most value for the firm, he said.

“Only you can determine what that is. You have to figure out how to automate the right things,” he said.

In order for advisors to get what they want and need out of their AI, they are going to have to have it customized. And no matter what, compliance will continue to require advisory oversight of the technology they use.

The starting point for an advisor can vary, Getson said. One advisor might choose to start with money management, while another might want its AI to start with looking at the allocations in client accounts and showing them opportunities and risks, or it might be an automation of marketing or communication.

“The point is the opportunities are endless, and you just have to pick a starting point,” he said, suggesting that advisors automate the things that are predictable so they can spend their time drawing their clients’ attention to the things deserving of being highlighted.

Above all, he said, while AI is very cool, “artificial stupidity” is very scary. “You don’t want to make mistakes at light speed with real money,” he said.

Getting Started

Getson said the best way for advisors to get started is to think about what they want and work backward. So, if an advisor wants better relationships with clients, perhaps using AI to catalog their needs and present a program for checking those needs off.

Four questions will help advisors have specific goals with their AI:

  • What do you want 3-5 years from now?
  • What milestones do you need to reach?
  • What constraints will you face?
  • What capabilities will you need?

And understanding the three ways in which AI can help will guide this decision-making. First, AI can serve a support function, where it helps advisors and staff complete tasks more efficiently and with greater accuracy.

Second, AI can be used as an augmenter, where it performs individual steps in a more complex process where a human has oversight.

And third, AI can add automation, where it performs complicated, multi-step processes so that the humans have more time to focus on something more important that AI cannot do, like talk to clients.  

“You can’t just say ‘I want to automate my practice,’” Getson said. “You actually have to think about a lot of things in your practice to figure out what’s worth automating. This is about abundant opportunity. AI is going to free you up to be more human.”

When refining what the firm needs from its AI, advisors should consider whether this piece of technology is something that should fill a general role, or a specific role; whether it should observe or interact; whether it should be risk-averse or opportunity seeking, or both.

Training The “New Hire”

And finally, advisors looking to bring AI into a firm should be aware of what steps need to be taken and tested in order to ensure this “new hire” is working out. This is the customization portion of the adoption.

The initial grunt work:

  • Step one: gather all the data the AI will need to do its job.
  • Step two: clean and enhance the data to avoid the “garbage in, garbage out” maxim.
  • Step three: organize and structure the data.

The fun stuff:

  • Step four: let the AI rank and evaluate choices. Correct what needs to be corrected.
  • Step five: let the AI make the recommendation. Correct what needs to be corrected.
  • Step six: let the AI choose an answer. Correct what needs to be corrected.
  • Step seven: let the AI have autonomy in decision making

“The cool thing is that you don’t have to pay the technology more to be there 24 hours a day, seven days a week, and it can give you an automatic advantage because it’s looking at every tick in the market, every opportunity, every transaction, and it could protect a portfolio one trade at a time,” Getson said.