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Technology With A Heart: How AI And Machine Learning Can Enhance Client Relationships

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Technology With A Heart: How AI And Machine Learning Can Enhance Client Relationships

Alex Serman • September 15, 2022

AI and Machine Learning is a hot topic now, but they’re a bit of a black box. How much of it is smoke and mirrors and how much of it will change the way we do business? What does AI even matter if it isn’t adding long-term value? Then again, what do wealth managers and clients consider value? Is it just a time-saving tool or something that can bring in more revenue?

What we do know is the number one priority in any advisor-client relationship is ‘building trust’. If executed properly, this is exactly where this shiny new technology makes an impact. Here are three ways that AI and innovation can help extend and strengthen your client relationships.

Customized and Personalized Experiences

    While there are clients and investors that have similar attributes, goals, risk assessments, etc., no two clients are the same, and the last thing any client wants is to be treated like a number. Ultimately, it is up to the wealth manager to ensure that the client has a personalized experience (especially now that most client meetings are taken remotely); however, when used effectively, Artificial Intelligence and Machine Learning technology can support that initiative. Machine learning is designed to learn and consider the behavior of data to determine what trends exist and extract insights to help firms make more informed decisions. Advisors can then automate customized reports that are tailored to the client’s investment goals and include actionable narratives with NLG (Natural Language Generation) to help them give more strategic financial advice based on these new insights.

    The Digitization of Financial Services

      Competition of financial services firms and advancements in technology have driven down costs and led to the digitization of the client-investor relationship. While this trend likely would have occurred anyway, the COVID pandemic certainly expedited this shift in investor preferences. With AI technology allowing firms the ability to minimize their operating costs, maximize profitability, and get data insights in a timely manner, wealth managers not only have a great opportunity to close the wealth gaps (whether generational, racial, or even regional), but they can scale their business at the same time. It is truly a win-win for the advisor and client so that advisors spend less time preparing for meetings and clients get the service they really want.

      The End of Siloed Data

        Throughout the data life cycle, there are many pieces of intelligence that easily get overlooked during a manual process. Without an automated and intelligent data ingestion or data validation tool, siloed data can tell inaccurate stories. Whether it consists of complex data feeds, disparate technology, or manual data processing, the result is the same – lack of clarity and inability to see the total wealth picture. AI technology can eliminate the cause of these errors and ensure that the wealth manager has all the data they need to create more informed investment strategies leading to better investment outcomes. An example can be identifying HENRYs (High Earning, Not Rich Yet clients) that will need more bespoke services to ensure long-term client retention.

        How to Choose the Right AI Technology for Your Firm

        While we now understand where the value in AI lies, the next question is: How do firms prioritize it? Fifty-five percent of advisors say the insights generated by AI were too complicated to use, and 41% believe that AI-driven client insights were not as impactful as they had hoped. But before we throw AI out the window, you must consider that not all AI is created equal (link to podcast). There are 3 things to consider when choosing AI technology:

        1. Ensure the priorities of the wealth manager and the firm are in alignment when it comes to adding value.
        2. Receive continued support from management and the technology vendor to ensure the success of AI solutions.
        3. Don’t quit before it begins. Focus on seeing a single use case or program through to the end to see the measurable results of the technology.

        The future of AI and machine learning is about enabling advisors to have deeper, more strategic conversations while scaling their workflow. Even though many in the industry see AI as a threat, wealth managers that are focused on providing a personalized experience at scale will see it as an opportunity to help their clients meet their financial goals.

        “In order to build the right AI model, deep domain expertise and horizontal business knowledge are needed. At First Rate, we understand the economics behind the data and believe that signals are more important than just developing complex technical solutions/algorithms. Furthermore, we follow the ‘Law of Parsimony’ and keep the dataset size close to the minimally appropriate, which is crucial. Having more data is not necessarily a good thing if data is not properly stored, cleaned, managed, crunched, and—last but not least—understood. It is mainly a matter of process and business know-how. We are a data-driven organization where the whole wealth management process is empowered by the data life cycle.” –Nayan Madhamshettiwar, Managing Director of Professional Services at First Rate

        Overall, the empowerment of advisors and investors through new technologies will continue to improve their relationships with one another. AI and ML aren’t as mysterious as one may think; ask questions and make sure there’s alignment between the needs of the firm and the tech. The firms that do can make all the difference in the world.

        For more information about First Rate’s innovative solutions, contact us today.