Top 5 tips for financial advisors to stay ahead amidst the rise of generative AI

Generative AI is a very powerful technology which is going to be truly disruptive for the economy in general and on the labour market in particular.

In a report published in March 2023, Goldman Sachs hints to artificial intelligence (AI) possibly substituting “up to one-fourth of current work”, potentially impacting 300 million full time jobs that could be replaced by automation.

From the outset: AI is definitely that powerful and disruptive (and will evolve to be even more), it is here to stay and in time it will fill out more of the space traditionally held by humans, and, yes, it will impact financial analysts and advisors as well. It is actually already happening, and its impact will go well beyond that of the robo-advisors services which have been available so far.

In such a scenario, financial advisors must acknowledge the change, understand it deeply, adapt and use the new technology to their advantage to provide a unique and irreplaceable services to their clients.

Tip 1: use the tool to simplify you work and make it more effective. Professionals should definitely not look at AI as an enemy to fight (they would lose) but as a powerful tool to take advantage of to readily create and access all data needed to advise and manage client wealth in an innovative and structured manner.

The great feature of Generative AI, that makes it so much more powerful form the available database analysis software and search engines, is the possibility to have extremely targeted results as long as the queries posed to it are relevant, detailed and tailored enough.

Linked to the above are Tip 2, Enhance your knowledge and skills through continuous learning and Tip 3, focus on the personal relationship with the clients.

A few decades ago, the so-called information asymmetry between clients and financial advisors was considerable, with the latter holding all the knowledge in the financial area, thanks to the inadequate structure of school curricula which neglected, and still do, financial knowledge. This situation made the “advisors’ life easier”, as very few clients possessing the tools to question and challenge the services rendered. In time, such asymmetry narrowed and its now going to be relegated to a niche space, which is the space where every advisor and consultant thrive.

That is the space were professional financial analyst will be irreplaceable and, in order to seize the opportunity, continuous, adequate learning is needed.

We already mentioned that Generative AI output is as much effective and relevant as the level of relevance and detail of the queries posed to it. It is then evident that having the knowledge to not only properly use the tool but to actually evaluate the results so to manage the dependence and relevance risk is a critical skill to acquire, maintain and constantly develop.

While such training is so important, in order to really provide added value to your clients, there is something you can only learn from a unique and irreplaceable source: your client. This is where Tip 3 comes into play. Financial advisors should not only devote time to their relationship with their clients but develop skills that will allow them to really understand their clients’ needs, even beyond what they might be rationally aware of.

Understanding emotional intelligence, study cognitive biases and behavioural finance will greatly enhance the possibility to not only maintain the profession to a sustainable level, but along with it truly help the clients achieving their financial and life goals.

Tip 4 is about expanding the scope of the profession, including every element that could allow advising the clients on all aspect of their life, as hinted above. Traditionally, financial advisors were focused in setting up and maintaining mainly investment portfolios, with part of the analysis being dedicated to long term planning such as retirement, and rarely including other sectors like real estate, venture capital etc. Remember, it is all about providing added value beyond what clients might be autonomously access themselves. It requires a lot of efforts and time, but as advisors adapt to the new environment they are to operate in, they must factor in all the changes needed and devote adequate resources to them.

Once advisors possess, maintain, and develop their unique skills, they can leverage Tip 5 – effectively use AI as a collaborative tool and leverage its power in sourcing data and organize them in a structured manner to support all the stages of the financial advisory process. This will lead the advisor to focus on what matters the most, on the highly complex, high value activities, on time to spend with the clients to truly understand their needs, by freeing time and resources from research and data mining, which can be so effectively performed by AI at a lightning-fast speed.

In essence, AI is both a threat and an opportunity: it all depends on how resilient and open to adaptation and commitment the financial advisor will be.

Remember: What will really make the difference is deploying skills that Generative AI cannot perform: empathy, commitment, passion, true care. Be there, with your client and for your client, in any moment of their life, support them emotionally when needed, and instead of succumbing to change, you will leverage it to be even more successful.

Roberto D’Ambrosio, is the CEO at Axiory Global

Also read: Google will expand generative AI tool to select websites