Understanding the DNA of the advisor/investor relationship
by Craig HawleyMr. Hawley, head of Nationwide Advisory Solutions, formerly Jefferson National, is a regular contributor to this magazine. Visit www.jeffnat.com
Once the domain of large institutions with deep pockets, Artificial Intelligence was a secret weapon to gain an edge over markets and gain insights into consumer behavior. More recently, RIAs and fee-based advisors are adopting AI to transform every aspect of their practice from the front-end to the back office. As we learned in a special report from this year’s fourth annual Advisor Authority study of more than 1,700 financial advisor and individual investors, one of the most pivotal ways that early adopters harness the benefits of Artificial Intelligence – and gain an edge over the competition – is to enhance the human element with their clients.
When it comes to collecting data and leveraging it to advance their business goals, industry giants have established a clear advantage. They perfected the practice of using AI for behavior-based segmentation, creating more targeted marketing to attract new clients, as well as offering customized products and services to retain more clients. But historically the job of processing massive quantities of data from multiple sources could take months, involving numerous specialists, across dozens of different departments.
Now RIAs and fee-based advisors can easily harness the benefits of Artificial Intelligence, as computing power has increased exponentially at the same time that technology has become more accessible and more affordable. The internet offers a highly efficient channel to instantaneously push, pull and leverage more data. Robust cloud computing, customizable CRMs and intelligent reporting tools needed to manage this data have become table stakes, even for the smallest practice.
What makes AI so transformative is its ability to learn. AI mimics human behaviors with intelligent systems that can perform at or beyond human capacity. AI can also evolve and develop entirely new capabilities. By employing all of the elements of AI – including refined algorithms, predictive analytics, natural language processing, speech recognition, image recognition, and other advances in machine learning – you can quickly assess and organize complex information and disaggregated data from multiple sources. You can dig deeper, work faster and take action in ways that can optimize the outcomes for your clients – and for your firm.
Improve the Advisor/Investor Relationship
In last year’s Advisor Authority 360-degree Special Report on the “DNA of the Advisor/Investor Relationship,” the vast majority of RIAs and fee-based advisors said that building a personal one-on-one relationship with their clients is among the top factors to ensure success. As this year’s study has shown, two-thirds of RIAs and Fee-Based Advisors and nearly 9 in 10 early adopters believe Artificial Intelligence will improve the advisor/investor relationship. They say top ways of using AI include understanding clients’ current needs and behaviors, and predicting clients’ future preferences.
Artificial Intelligence can help you put your clients at the center of everything you do. Every time a client visits your website, enters your client portal, reads your blog posts, replies to your emails or calls in to your office, AI allows you to capture that moment to gain greater insights into their interests, intentions, demands and desires. In this way, you can develop predictive profiles and hyper-targeted solutions to perfect and personalize your relationship with each individual client.
Four Factors to Harness the Benefits of AI
What could you accomplish for your clients with technology that is more intuitive and intelligent? Here are four factors for harnessing the benefits of Artificial Intelligence to reinforce the relationship with your clients and create a competitive advantage for your firm:
Expand Holistic Planning
- Using AI you can expand your service offering in new ways, whether providing a simple low-cost Robo experience to keep fees in check, or more sophisticated holistic planning solutions, to bring services such as estate planning, tax-planning and insurance in-house. Year over year investors say customized holistic planning is among the top three factors for choosing an advisor.
Improve Decision Making
- Centered squarely on serving their clients, RIAs and fee-based advisors and early adopters plan to use Artificial Intelligence to augment human intelligence and improve decision making. Advisor Authority shows their number one way of using AI for decision making over the next twelve months will be protecting clients’ assets against market risk.
Enhance Product Selection
- Not only can you use AI to evaluate and introduce new services for your clients, you can use it to ensure that you make the best product choices. Nearly three-fourths of RIAs and fee-based advisors and 9 in 10 early adopters agree that AI will help them select products to achieve clients’ financial goals.
Put Security First
- As the debate around online privacy continues to intensify, roughly 8 in 10 Investors, RIAs and fee-based advisors, and early adopters all agree that cyber security breaches at leading corporations increase their concerns about using AI. They also agree that privacy concerns about sharing personal and financial information is among top three concerns about using AI. A clear cyber security policy regarding ethical data use, information sharing, transparency and privacy is mandatory.
AI Can’t Replace Face-to-Face
The customer experience can be defined as the way an advisor and investor interact at all points in their relationship. It is essential for nurturing the advisor/investor relationship and can provide effective feedback mechanisms at every touchpoint along your client’s journey with your firm. But AI is a means to an end – not a replacement for the human element. While algorithms simplify and automate, make things more efficient and even more intuitive, it’s important to remember that humans still have a seat at the head of the table.
Artificial Intelligence reduces the amount of time and money spent on more routine commoditized tasks, such as basic portfolio management and back office operations, so you can spend more time on adding value by focusing on what matters most – building the relationship with your clients. AI not only creates more time for you to meet face-to-face and one-on-one with your clients, it also allows you to enhance the quality of these meetings. You can move beyond financial matters, gain greater insight on clients’ unique preferences and important life goals. You can arrive at a more customized set of solutions to serve your clients and their families more holistically – to capture a greater share of wallet and retain more assets as they pass to the next generation.
Even in this age of instantaneous digital communications, where clients expect things at Internet speed, both investors and advisors still say face-to-face meetings are their preferred form of communication. In the end, people want to connect with people who understand them – and can align with their best interests. ◊
Read the entire report here.