The percentage of advisory firms using AI grew from 51% to 74% over the past two years, according to F2 Strategy’s latest survey of 42 RIAs, wealth managers and broker-dealers. And there’s a lot more data to be happy about, says Doug Fritz, co-founder and executive chair of the wealth management technology and marketing services firm.
“The good news in our second study on the state of AI in wealth management is that adoption of two types of AI technology have dramatically increased in two years — advisor efficiency and tools for note-taking/meeting preparation,” Fritz said in an interview.
But, he adds, “that's not really the good news, which is … the realized impact of AI on the industry. It’s eye-popping — and I’ve been in the industry for 27 years.”
AI use by advisors today can result in an average time saving of up to 90 minutes per client meeting. “It's an astonishing amount of time saving” for, say, a typical advisor doing 40 quarterly meetings each month to serve a client base of about 100, he points out. “It’s amazing.”
The majority of this impact is being experienced by RIAs and some of the larger institutional firms. “But this is very much a win for the little guy,” according to Fritz. “These are the smaller firms, the firms with $1 billion to … $100 billion [in assets] in the RIA space.”
The bad news, he points out, is that AI adoption by bank trusts “is below 20%, whereas the adoption in the RIA space is over 50%.”
Of the 74% of wealth firms that say they’re using AI, roughly 80% are RIAs, F2’s latest study finds. Meanwhile, of the 26% of firms not using AI, 90% are trust companies.
This deficiency is found at the more traditional bank and trust organizations, which — broadly speaking — includes firms such as PNC, Comerica and Truist.
“Also, we can say the wirehouses are doing OK on AI adoption,” Fritz said. “The bank and trust [industry segment] is not keeping up with the [AI] efficiencies yet, so it's a bit of a story of the haves and the have-nots.”
This means that bank-based wealth managers — already considered to be behind in terms of its AI usage — risk sliding "even further back on margins and advisor expectations,” concludes the report by F2 Strategy, which won a 2024 ThinkAdvisor Luminaries award for thought leadership.
As for the state of AI technology at independent broker-dealers, Fritz says many of these firms have adopted these tools: “They've allowed them to be used on their platforms. There's already been notable announcements like at Raymond James and Cetera, who’ve announced partnerships with [AI] firms over the past few months. The independent BD space is already there.”
F2’s research is revealing “valid use cases of AI” and showing that “fairly low-cost technology” can produce “significant ROIs, which is great,” he said.
What’s Next?
The 90 minutes of time saved for each client meeting gives advisors greater operational efficiency, Fritz says. Concurrently, advisors are “collecting and curating more client information, learning more and deepening the [client] relationships.”
The resulting challenge, he says, is that the industry has to critically ask: “What are we going to do with that extra time and the extra information?”
While some wealth managers might enjoy spending more time on the golf course, he jokes, the industry is likely going to further specialize and produce further “efficiency in areas like planning, portfolio construction, tax loss harvesting, etc.”
As AI becomes more of an agent (or assistant) and a force for starting things, according to Fritz, the industry will have to consider whether or not it should be used to, say, “open an account for a client and schedule their estate planning review.”
If the answers are “yes,” then AI would pull data together and schedule required meetings, he says. “It [could] pre-populate the tools that [advisors] need it to and act more like an agent or assistant to the advisor. That's what we're going to see next.”
Overall, the greater efficiency and productivity for advisors using AI should result in “deeper client relationships, more servicing for clients and ultimately better advice,” said Fritz. “If I can kind of be so bold to say, it'll probably help us be better advisors.”
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