And the hits keep coming, so to speak. Never has the every move, decision, and interaction with clients of financial advisors been analyzed to this degree. And that will only become more prevalent. Any form of questionable practice will be identified and challenged.
The use of Artificial Intelligence (AI) tools to monitor regulatory compliance is a conversation that is heating up, not just within financial services firms, but within regulatory agencies who are now considering both AI and machine-learning tools to enforce compliance.
This increased automation using AI focuses on Know Your Customer (KYC) rules, Anti-Money Laundering (AML) rules, and tax reporting.
AI isn’t all about “policing” the industry; its broader use can be used for financial advisors to analyze and understand how account holders spend, invest and make financial decisions, so they can customize the advice they give. The role of the financial advisor will change significantly as machines take over routine aspects of the service offering. The gap left is the key to improving the financial service.
Many organizations that deliver support to financial advisors recognize the importance of understanding people before numbers in financial planning. These organizations tend to be early adopters of AI.
Behaviorally smart financial advisors already use a validated scientific discovery process with their customers in advance of the first meeting. This measurable insight into the customer’s personality, the client’s communication style, risk patterns, decision-making approach and reactionary market movement pressure points, is available at every touch point so clients can be managed honestly, openly and transparently.
The significance of revealing natural and instinctive financial personality and delivering targeted advice provides assurance, so advisors know the client at the deepest level – among other reasons, to mitigate compliance risks.
Information obtained from the use of an automated discovery process puts clients at the center of the financial planning process; matches advisory teams, clients, goals, and solutions; enables a customized communication approach at all stages of the client lifecycle; builds tailored portfolios; behaviorally manages client emotions; and enhances compliance and reduces complaints.
The financial industry is waking up to the use of AI. It is asking the right questions in terms of how it can add value to business models and satisfy regulatory requirements – thus demonstrating to a skeptical public that they are cleaning up their houses.
Like all technology, AI needs to be in partnership with humans. Financial advisors who use a validated financial personality discovery process work more effectively and efficiently by filtering key information from their clients’ online personality profiles to inform the advice they give.
The danger is that too much focus is placed on the use of AI for detecting and analyzing brand sentiment or providing investment insights, even identifying rogue behavior – and yet missing the greater use: Getting to know the customer at a deeper level to deliver the best and most accurate advice.
The financial sector is, in a sense, being forced into this new world. Lack of trust, media and regulatory bodies sharpening their focus on compliance ensure the industry is rushing to find solutions that satisfy regulatory compliance, including staying within the bounds of the DOL’s new fiduciary rule.
Traditionally, a slow-adapter industry, the financial sector has been putting its toe in the water in terms of using robo-advisors. Investors are drawn to this service as they no longer need to pay substantial fees for something they don’t want, need or in some cases get.
Artificial Intelligence used as a tool to put the client front and center of financial advice can and should be pursued. Technology that reveals below-the-surface information about clients will empower advisors to proactively engage said clients on what matters to them the most and on their terms.
Financial advisors, whether individual practitioners or part of a corporate organization, can no longer get away with pushing inappropriate product to investors. The customers are smarter, and the regulators clued in, so what is the smartest change to make to begin to get back the trust of customers? AI.
Get to know your customer at a deeper financial and personal level. Uncover what they want to do with their wealth. Build a relationship based on understanding their inherent approach to life, offering emotional support and becoming the go-to person when they make life decisions.
Much can and will inevitably be managed by AI automation, but most investors will want the human touch. An advisor who knows the importance of a quick phone call to a client when markets wobble or sending an interesting opportunity to an investor able to manage risk – these are the service touch points that maintain or help rebuild trust in the industry.
Financial advisors need to prepare and equip themselves to use AI in general, and financial personality discovery tools in particular, if they are to stay ahead of the game, deliver more relevant offerings to the client and build long-term relationships.