As an almost daily diet of AI-related news emerges, one of the largest wealth management groups in the US has partnered with a firm that provides IRS-sourced data for financial advisors.

Hightower Advisors has signed an enterprise-level agreement with TaxStatus, becoming an early adopter of the platform to support its advisors with verified, IRS-sourced financial data. 

The development comes as TaxStatus also unveiled in a statement that it is partnering with Advice.ai to bring tax planning strategies to the TaxStatus Verified Financials platform. TaxStatus provides IRS-sourced financial data for financial advisors and CPAs.

The move is yet another example of how AI – a term covering different capabilities – is shaping the wealth management industry.

“At Hightower, we’re constantly looking for ways to give our advisors a meaningful edge and elevate the client experience,” Larry Restieri, CEO of Chicago-headquartered Hightower Advisors, said. “By partnering with TaxStatus as an early adopter, we’re enabling our advisors to have a more fulsome understanding of clients situations – helping them deliver holistic, more proactive advice at scale.”

TaxStatus said its partnership with Advice.ai handles the challenge that AI is only as good as the data on which it is based.

“Requiring clients to manually upload tax returns is a friction-filled process that captures only client reported information. CPAs report that roughly 30 per cent of clients fail to provide all tax information – which means that if a tax return is used solely to render advice it may result in faulty recommendations,” TaxStatus said.

An important element, TaxStatus said, is that it obtains data directly from the source: the IRS. 

“With client consent, TaxStatus retrieves historical and future Verified Financials for each client’s entire financial household, including individuals, businesses, private investments, trusts, and estates, as well as what third parties such as employers, custodians, and financial institutions reported to the IRS on the individuals’ behalf,” it said. 

The proprietary AI engine run by Advice.ai will apply its library of tax, financial and estate planning strategies against the TaxStatus dataset. 

Recent months have been busy for Hightower. Last week, for example, it announced that Journey Strategic Wealth was added into Hightower Signature Wealth. Hightower Signature Wealth is a new division featuring a centralized brand, investment platform and middle- and back-office services for advisors who sign on. (See an analysis from our US correspondent last fall.)

The gap
“There’s a big difference between intelligence and knowledge,” Kevin Knull, CEO of TaxStatus and co-founder of Advice.ai, said. “You can be extremely intelligent and completely uninformed. AI has the intelligence, but without complete, verified data, it doesn’t have the knowledge it needs to surface proper opportunities. Financial advisors are well aware of this challenge, but they can only render advice based on the information they have.”