How Sam Altman-OpenAI Saga Affects RIAs

Charles Paikert US Correspondent New York November 27, 2023

How Sam Altman-OpenAI Saga Affects RIAs

Our US correspondent takes a detailed look at the drama around the leadership of OpenAI and what this means for the wealth management sector.

The Sam Altman saga may be over, but the battle for the heart and soul of OpenAI and artificial intelligence will have long-lasting repercussions.

At the very least experts say, the bitter and very public clash between Altman, a co-founder and CEO of OpenAI and his board of directors – compounded by meddling from Microsoft – underscores the enormous importance and consequences of AI development.

Before Altman’s reinstatement as OpenAI chief executive, there were worries about the future of the company’s signature product, the enormously popular generative AI tool ChatGPT.  In particular, startups relying on OpenAI technology to develop their own AI software were also concerned that their progress would be stymied.

While those fears have been allayed, the turmoil that gripped the development community highlighted how critical AI has become for increased productivity in a number of industries, including wealth management.

“AI will transform financial services,” said David Kaufman, CEO of financial planning software vendor Voyant. “The efficiencies that RIAs should achieve through efficiencies via automation, comprehensive collection of data and intelligence from disparate data sets, and almost instant comprehensive analysis, will allow advisors to focus on client engagement and hyper-personalization of service offerings.”  

What’s next
Now that Altman is back at OpenAI, with backing from a new board of directors to presumably accelerate AI development, what can financial advisors expect to see in the near future?  

“At Schwab IMPACT, Schwab was pretty clear that they were looking more toward client service, at least in 2024,” said consultant Joel Bruckenstein, president of T3 (Technology Tools for Today) and producer of the firm’s annual tech showcase conference. 

AI will generate blogs, brainstorming, research and agenda creation, Bruckenstein said. Marketing firms FMG and are currently deploying AI and Catchlight is using the technology for lead generation. AI will also be used for recommending ‘next best actions’ and “identifying business opportunities among existing clients,” Bruckenstein added.

What’s more, Bruckenstein expects a slew of major AI product announcements for wealth managers at the next T3 conference, scheduled to be held in Las Vegas in January.

Boosting productivity
Office productivity is primed to be a primary market for AI developers.

A generative AI assistant, such as Google Assistant or Microsoft Copilot, “will allow multistep tasks such as scheduling multi-participant meetings, completing complex data analysis, or opening new accounts and transferring funds to be completed with a few spoken words,” said Kaufman. “Document creation with become trivial, especial for routine correspondence.”

Generative AI is also expected to improve an RIA’s ability to anticipate a client’s needs and provide relevant information. Customer data will be used to predict potential financial needs and allow financial advisors to make appropriate suggestions.

"Table stakes"
Artificial intelligence is already “table stakes” for advisors, according to Matt Moberg, senior vice president and portfolio manager at Franklin Templeton, speaking at a session on AI at the Schwab conference last month.

Advisors are currently using generative AI language models such as ChatGPT to generate content, analyze data, communicate with clients at unprecedented speed and scale and rapidly expand the capabilities of customer service reps, panelists at the session noted. 

One of the panelists, Raj Madan, chief information and technology officer for Advisor Engine, demonstrated how, in just a few minutes, he was able to use a generative AI application to write an email that could potentially be sent to thousands of clients, but with personal touches.

Red flags
Of course, progress comes at a price, and a number of challenges will accompany AI adoption.

Generative AI software still spins out false facts, or “hallucinations.”

RIAs using artificial intelligence must make sure AI only looks at reliable data when forming responses to prompts, Bruckenstein warned. “It cannot be crawling unconstrained on the internet.”

Data sharing agreements will also be scrutinized, Madan said. Data issues around AI are, in fact, still unresolved, one of the advisors at the Schwab conference noted. “Who owns the data?” the advisor asked. “That’s a real problem.”

Artificial intelligence’s role as an investment tool is also unresolved. 

The Securities and Exchange Commission is looking into AI’s impact on predictive data analysis and, even when regulatory concerns are addressed, advisors will face competition from low cost AI service offerings from the industry’s biggest players, according to Kaufman.

“Consumers are going to have access to information on complex topics explained in a simple-to-digest manner, which will further challenge the idea of needing an advisor,” Kaufman said.

Job security
So should advisors fear for their jobs?

The way people use Google to research an illness is a good analogy, according to Moberg. 

“People now use Google to self-diagnose,” he explained at the Schwab conference, “but they still go to the doctor. They still want to talk to a human who is an expert. Clients of advisory firms can do more research using a Google search engine than ever before, but they still want to talk to an advisor who is an expert. The human overlay is very important.”

That being said, Moberg warned advisors that they must learn how to use AI, and know how to prompt the application for better results and increased productivity.

“It’s not hard to learn how to use,” he said. “You won’t get replaced by AI right away, but might get replaced if you don’t know how to use it.”

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