Artificial intelligence and other technology, along with the growing number of freelance workers participating in today’s gig economy, offer opportunities for advisors to better serve their clients and increase their sales, according to Fidelity Institutional executives.
AI stands to “transform” wealth management, Andrew Brzezinski, vice president at Fidelity Institutional, said Thursday at the Fidelity Inside Track conference in New York. AI, for one thing, can be used to “tap into” a lot of data including useful information that investors are willing to share with advisors, he said.
“The big question for this room is not if AI will transform wealth management, but how?” he told attendees, citing data from a white paper by the Boston Consulting Group saying the technology can increase by 15-30% top-line revenue growth from improvements in sales, relationship management and client experience. The data also showed firms made 10-15% efficiency gains from improvements in operations, risk and service costs from AI and also saw an overall 10 basis-point increase in assets under management from it, he said.
That can go a long way toward making up for the “headwinds” the wealth management industry is facing from issues including regulations and digital disruption that stand to impact revenue growth, he said. Who will win in this environment are the firms that “deliver highly personalized services” by deploying AI solutions made possible by the insights made possible from all the data being collected, he told attendees.
“These are the gains that we can aim for,” he said, noting Fidelity is investing in AI in a few ways, including the Insights + Analytics product that it’s piloting now. In announcing that last year, the firm said “one of the first tools that Consolidated Data from Fidelity will fuel is Insights + Analytics, an offering which explores how quantitative techniques, including artificial intelligence, machine learning, and predictive analytics, can help advisors save time, grow their businesses and enhance their relationships with clients.” The first “custom-built solution within Insights + Analytics will be a set of book analytics capabilities, developed closely with client feedback and Fidelity practice management expertise to create a ‘story-based’ interface that helps advisors answer real business questions,” it said at the time.
Brzezinski cited one use case of that, saying it’s possible to “predict investor money movement by applying machine learning to a large historical dataset of account activity across millions of investors.” He noted the technology can be used to track normal money flows, along with unexpected incidents that have an impact on investors
But for AI to truly understand an investor, it’s important to “augment” financial data with personal and household information, including life events and hobby details, he said.
AI can also be used to enhance the various tasks that advisors in the industry normally do, including to try to change behavior and get better outcomes—possibly even retain talent, he said. The technology can be used in digital assistants to generate sales leads and also to help asset managers prioritize their time and better target decision makers, as well as predict how and when to trade, he noted.
AI won’t replace everybody but “AI is going to be disruptive … and we shouldn’t shy away from that,” he said, adding it’s important for firms to just figure out where AI plays its best role and where humans play the best role.
Fidelity, in conjunction with technology partners, has also been exploring natural language processing, another form of AI, he told ThinkAdvisor after the session.
“AI has the potential to provide new and innovative opportunities for our industry,” according to Mike Durbin, president of Fidelity Institutional. And Tricia Haskins, vice president of Solutions & Platform Consulting at Fidelity Institutional, said in another session Thursday that she agreed.
But while over 70% of firms want to use AI, only 5% are actually using it now, she said. As one step to change that, firms should increase and better use the data they have, she suggested.
Technology overall should be thought of as an “enabler” of the work you do that helps you do that work more efficiently, she also said, encouraging advisors to embrace technology and the digital transformation that’s happening now, as well as develop a technology strategy to help achieve their business goals.
In another session, Kim Langway, vice president of product management at Fidelity Institutional, said the solo/self-employed workforce is growing three times faster than traditional workforce, driven in part by the flexibility it offers. But challenges include income volatility and the fact that freelancers must find their own health insurance and don’t have the same incentives to save for retirement because there’s no company withholding their money for that or taxes.
That does, however, present an opportunity for advisors because the self-employed tend to need more help than traditional salaried employees with financial planning, she pointed out.
LinkedIn lists more than 1.4 million people who self-describe as self-employed, she said, also pointing to a projection that the self-employed could make up 50% of the workforce by the middle of this century. The average age of a freelancer is 48 and they tend to be people who previously worked for many years in traditional full-time jobs where they developed a lot of experience, she said. However, it takes skill for an advisor to serve such clients. One suggestion she made was to make sure to treat them as both individuals and business owners.
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