artificial-intelligence-financial-advisors

Robo-advisors are on the rise, says CNBC. The outlet reports how Wall Street is increasingly relying upon artificial intelligence behind the scenes to manage client portfolios.

CNBC names Morgan Stanley as one firm of many that is experimenting with algorithms, data mining, natural-language processing and other tools for wealth management.

Morgan Stanley’s Next Best Action initiative, launched this year, is a technology available to over 15,000 financial advisors at the firm that evaluates client communications and applies machine learning to develop custom suggestions for clients.

For example, the tool could nudge your advisor to alert you of the downgraded status of a major stock in your portfolio, or offer helpful resources regarding upcoming natural disasters in your path.

"The machine serves up those ideas to the financial advisor, and then they decide what makes sense based on their practice and the needs of the clients."

"The machine serves up those ideas to the financial advisor, and then they decide what makes sense based on their practice and the needs of the clients," explains Jeff McMillan, chief analytics and data officer at Morgan Stanley Wealth Management, to CNBC.

As natural-language technology becomes more advanced, conversational AI skills are being put to the test in service of wealth management clients who want quick responses to their pressing financial questions. Meanwhile, machine learning is also gaining steam for its predictive prowess.

Automated investment service firm Wealthfront’s Path feature is a financial planning crystal ball that uses third-party data and machine-learning techniques to answer client questions about major financial decisions.

"If you tell [Path] that you're going to buy that $1.3 million condo in the East Village in five years, it can actually tell you, 'That's great. If you want to do that, it looks like you might have to retire a couple of years later or you could just save more," Kate Wauck, vice president of communications at Wealthfront, tells CNBC. "It's not siloed advice. This is the power of automation."

Morgan Stanley underscores that technology is there to enhance its offerings, not remove the crucial element of human guidance. "The most powerful driver of client satisfaction are in-person meetings and phone calls with our clients," McMillan said to CNBC.

The technology’s purpose is two-fold: to free up time for more substantial client conversations and to reach more people faster than human advisors could. Interestingly, some firms even tell CNBC that their clients prefer non-human contact to human advisors.

Experts are split on whether AI will completely supplant human advisors and if so, how soon.
"I think the technology is already there to replace the human," Menon said to CNBC. "It's a question of adoption, as well as the seeming reluctance of the industry to let go."

Financial advisor Ric Edelman, executive chairman of Edelman Financial Services, is also not sure the technology is there yet.

"When it comes to personality issues and the soft side of money, the algorithms, the AI, is nowhere near ready yet to be able to help you deal with the complexities and nuances of personal finance decisions," Ric Edelman, executive chairman of Edelman Financial Services, said to CNBC.

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