Thanksgiving is a holiday that inspires conversation and reflection: Could it be just a year ago that ChatGPT burst into our lives and our jobs?
Yes, it was just days after Thanksgiving 2022, and the business world has been on fire about AI ever since. I’ve heard grand predictions that generative AI will change financial services in a way not seen since the dawn of the internet.
It’s exciting, I admit, but experience has taught me that innovation is rarely a bolt of lightning; more often, it results from years of brainstorming, prototyping, and a healthy dose of failing.
It will be crucial for companies to pick the right ideas to pursue for applying AI. So, I’d like to suggest some criteria for AI projects in financial services:
1. Get financial advice to the legions of people who urgently need it.
Those who belong to Gen Z and millennials know it: Their retirement is all on them. Some were captivated by crypto and stock picking—to their detriment. I notice a lot less swagger going on these days.
Move up the generational ladder, and Gen X and some boomers are under-saved and ill-prepared for the rising costs of healthcare, real estate, and other expenses that could deplete their nest eggs.
The confluence of digital and human advice that’s happening can help address this. So can the coming together of wealth management and workplace retirement. But only if firms turn their intelligence, will, and dollars toward the goal.
Several guests on my WealthTech on Deck podcast have been gung-ho on the potential for AI.
“We have a lot more questions (about AI) than answers at this point,” said Chad Virgin, managing director of Allianz Life Ventures. “But the change is going to happen, and it’s going to be fast, and it’s going to be exciting. I believe it’s going to deliver better outcomes for clients.”
2. Solve the decumulation problem.
This is the “nastiest, hardest problem in finance,” said Mark Paulson, vice president of global hedging business development at Allianz Investment Management U.S. LLC. He ought to know.
Next year is the “peak” year for boomer retirements: An estimated 12,000 people each day will turn 65. Many of them will work, some for years. But they are wise and know that days when they don’t want to work or aren’t as able to are inevitable.
They have money spread among accounts and institutions. A reckoning is coming, says my friend Laura Varas, founder and CEO of Hearts & Wallets. Those future retirees will find their favored institution and consolidate assets with it.
Who will they choose? It’s probably one that is ready to help them turn their crazy quilt of accounts into an income stream in a way that minimizes their taxes and maximizes their income.
3. Deliver the kind of service customers want, not what’s easy or convenient to provide.
As Varas will tell you, customer service trumps everything. Investors will return to the firms that listen to their concerns and dreams and respond with advice and assistance to match.
We’re falling short so far, according to Varas.
“What other industry thinks you walk into the store and I’m going to choose what you’re going to buy?” she says. “Ridiculous! Right? … How dare we pick the service model for our customer and think that we can.”
Her firm helps financial services companies analyze the capabilities they can deliver and align them to the investors they want to serve (listen to my podcast with Laura to learn more). There are many investors out there with net worth that won’t ever earn them a family office but could be served with a well-tuned combination of digital and human advice.
Can AI help get us there?
4. Give advisors the space to do what clients really need.
For all the wealth we’ve created in this industry, we’ve also boxed advisors in. They have a desktop loaded with tools that don’t speak to one another, fail to present the panoramic view of any client’s financial life, and ultimately don’t produce the best outcomes.
To add another wrinkle, clients today seek more than a “hot tip” or “great new product” from their advisors. They want someone who captures their goals and pursues a path that will make them feel protected from the threats of inflation, global unrest, and ill health.
“You’re in the business of saving lives,” gerontologist and psychologist Ken Dychtwald tells advisors. But they can’t save lives if they must spend hours downloading data into Excel and writing macros to create client reports.
The accelerating trend toward investment models in portfolio management is a promising one. Another is the work of true innovators like Reed Colley. His Summit Wealth platform aims to make advisors more effective and efficient, grow their business, and form deeper client relationships.
Is AI up to these jobs? Yes! I also know AI is only as good as the human advisor who leverages all it has to offer to help clients enjoy better client experience, improved financial outcomes and peace of mind.
Jack Sharry is EVP and chief growth officer of LifeYield and host of the WealthTech on Deck podcast. He is on the board of Next Chapter, a leadership community dedicated to improving retirement outcomes.