Wealth managers are fascinated by AI, but so far their expertise and ability to put this into practice doesn’t match their enthusiasm. Closing the gap and getting strategy right were the sort of challenges aired at the annual IMPACT conference of Charles Schwab last week. We report on the conversations. 

When it comes to artificial intelligence and financial advisors, it’s clear that interest is sky high but expertise is very low.

That was reflected in both the number of sessions on AI at Charles Schwab’s annual IMPACT conference and the standing room only attendance many attracted. And it was fitting that the conference was in San Francisco, where it seemed like ads for a multitude of AI products were on every corner.

“I’m trying to figure out what I don’t know and learn what I need to know,” said Gary Schlaffer, principal at Alexander Randolph in McLean, Virginia. That statement, expressed after Schlaffer attended the “AI Unlocked” session, neatly summed up a prevailing sentiment at the conference.

Right now, AI apps that transcribe and summarize meeting notes with clients and then feed action items into CRM applications for implementation appear to be the most widely adopted by financial advisors. The amount of time Jump, one of the most popular apps, saved one advisor, was, he said, “life changing.” “Note taking apps have definitely been the big one for advisors,” said Adam Mosely, director of Technology Consulting for Charles Schwab.

Other popular AI applications mentioned at the conference included those that automate work flow and document processes, (such as Scribe), manage documents (Box AI), process lead generation (Catchlight), create presentations (Gamma) and analyze data and generate content (ChatGPT, Perplexity, Claude, CoPilot). 

In addition, a wide array of fintech vendors incorporating AI were featured on the conference’s exhibit floor.

Benefits
Artificial intelligence will allow advisors to be more efficient and productive, especially when it comes to automating repetitive tasks that are now one hundred per cent manual, said Bashar Abouseido, chief information security officer for Schwab. Workflow will become streamlined and client questions will be answered more rapidly and economically, added Mosely.

When advisors are brainstorming a new project and starting from scratch, an AI model can give them a 60 to 70 per cent head start, according to Abouseido. Analyzing data, creating content, marketing plans and presentations and communicating with clients will also become easier and more efficient with AI, experts told conference attendees.

Service models will change “in a significant way” as a result of artificial intelligence, predicted Keith Vanorden, head of distribution, US Global Wealth Management for TCW. For example, “AI is going to enable advisory firms to offer customized services such as bill pay and travel arrangements that now only family offices provide,” Vanorden said.

Concerns
But using artificial intelligence comes with a myriad of concerns, caveats and risks. Foremost is the fact that AI is still “non-deterministic,” i.e. not always accurate. Transparency, privacy and security are also major issues, and “information leakage” from AI can lead to legal liabilities, Abouseido cautioned.

Bad actors using AI for malicious purposes will be a big problem, conference speakers warned advisors. 

When answering clients’ questions, “‘Are you real or are you fake’ will be a big deal,” said Sheri Fitts, CEO of her eponymous consulting firm. “Deep fakes” and “phishing” emails are expected to proliferate and cause security problems, as AI will be able to mimic human voices nearly flawlessly and send fake emails using perfect spelling and grammar.

These concerns have caused a number of compliance departments to take a wait-and-see approach toward a number of AI initiatives, as the industry waits for the SEC to provide clearer guidance.

How to proceed
In the meantime, advisors should proceed with caution, conference speakers said. Safeguards should include always insisting on two factor authentication and strict protocols for client communications. Firms were also advised to set up small groups of advisors to begin sampling AI tools and establish governance guidelines and a management policy for use cases.

Because AI lacks empathy, advisors also need to develop a “digital EQ [emotional quotient/intelligence],” Fitts said. “When you’re adopting the apps, don’t leave your humanity behind.”

Because  AI development is moving so rapidly, Vanorden urged advisors to stay current. “Being active in this space really matters,” he said. “Keep pushing yourself to try something new every six months.”

See stories here, here and here from our US correspondent about the Charles Schwab conference.