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Ken Lotocki

Technology > Artificial Intelligence

The Financial Advisor’s Caddy: AI-Based Planning

By Ken Lotocki

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Creating a financial plan is a complex and often time-consuming process. On average, it takes about 10 hours to create the plan, and the planning process takes about 35 hours per client over the course of the year, according to Kitces Research.

An artificial intelligence-based planning solution can empower advisors to build flexible plans quickly and with a high degree of accuracy.

In many respects, AI’s role in financial planning resembles the job of a golf caddy.

Golf appears to be a simple game. Grab a club, smack the ball and putt it into the hole. However, it’s a complex pursuit that requires skill plus a knowledge of the course — enter the caddy. Caddies can inform a player of what club they’ll need to avoid hazards on the course, help read the greens, and ultimately, provide their guidance on the next best action to take based upon each stroke.

Like the conditions on a golf course, the financial markets are dynamic. Market events and many other factors can affect a client’s portfolio on a day-to-day basis, and an AI solution can help an advisor adjust their client’s financial plans to coincide with changing life circumstances, retirement or budgeting objectives and shifting risk tolerances.

AI tools can serve advisors much like a caddy interacts with a golfer, suggesting next best actions for planning strategies in the form of hyper-personalized financial advice, enhancing outcomes for clients while freeing advisors to spend more time engaging with and prospecting for clients.

Let’s examine some ways that advisors can deploy AI to build better holistic plans.

Financial Guidance Coupled With Enhanced Risk Management

Golfers rely on caddies to analyze each course and tailor a game plan to attack it. Every course presents different challenges, just as every advisor’s client necessitates unique financial guidance.

Unlike traditional methods of financial planning, utilizing manually updated spreadsheets, AI can seek and recommend unique financial strategies for clients, assist with tracking of the plan over time and reconfigure it on the fly as their finances and/or the market dictates.

This results in more appropriate plan builds, increasing the universe of strategies to achieve a client’s goals. Whether they’re saving for retirement, budgeting for a child’s college tuition or purchasing their first home, an AI-based solution can arm the advisor with the best option every step of the way toward that goal.

AI can also assist in identifying and mitigating risk while eliminating advisor bias. It achieves this by analyzing a client’s finances, demographics and financial goals. The technology is capable of contextualizing the next best financial decision based on these elements, with the end goal of crafting a truly holistic financial plan.

Personalization and Improved Client Engagement

Just as a caddy takes into account their golfer’s strengths and weaknesses when preparing for a match, personalization in the advice industry has been taking root.

Younger generations that are set to benefit from the pending great wealth transfer, including millennials and Gen Z, have been instrumental in driving this trend. Rather than accepting the investment ideas of their forebears, many younger investors are selecting investments based on their values. This accounts, in part at least, for the uptick of environmental, social and governance investing in recent years.

AI planning tools can tailor products based on clients’ assets, goals and belief systems. These solutions can also act as a proverbial sandbox for clients, allowing them to play around with various forecasted outcomes and choose the best path to their goals.

Adapting to the Course

AI-based planning solutions help financial advisors increase their efficiency, improve their decision-making and deliver bespoke service to their clients — all in the name of enhancing engagement and deepening relationships.

Caddies are invaluable when it comes to the ultimate success of golfers, crafting strategies based upon their strengths and the layout of the course.

AI solutions play a similar role for advisors, guiding their decisions and empowering them to offer advice and strategies to meet a client’s holistic financial goals — whatever those goals may be.

Ken Lotocki is chief product officer and co-founder of Conquest Planning, a financial planning technology platform that leverages AI to help advisors build personalized, dynamic plans.

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