Artificial Intelligence: A Lot of Hype, but Will It Change the Wealth Space in a Meaningful Way?

• [03:00] Geoff Moore shares his thoughts on AI
• [03:37] Why wealth firms need to understand how to use AI effectively
• [05:48] Data privacy and security when using larger systems like Open AI
• [11:19] The role of AI in finance vendor partnerships and regulatory compliance
• [15:41] Overhyped claims by some AI tools
• [18:31] Will AI in wealth management gain traction?

• “I’m pretty excited about the technology. This is pretty exciting. It almost reminds me back a little bit when the World Wide Web started.”
• “I think it’s good to have committees that can have just a broad sense of, you know, what their jobs are like.”
• “We have a legal precedent saying that chatbots are responsible for their answers, even if that differs from the official policy of the organization.”
• “I’m still seeing a ton of potential out there with AI to help really accelerate both our learning and how we do our day-to-day jobs.”
• “I’m gonna go on record as saying it’s gonna get traction.”

1. Form an AI committee within your organization.
   • Having diverse insights from across the company helps navigate innovations like AI effectively.
2. Stay informed on regulatory precedents related to AI.
   • Understanding legal responsibilities can protect your firm from future liabilities.
3. Involve legal and compliance teams when implementing AI tools.
   • This ensures that new technologies adhere to industry standards and regulations, safeguarding your business.
4. Evaluate AI claims critically and invest in models with proven results.
   • Not falling for overhyped expectations can save resources and direct focus toward truly beneficial AI applications.
5. Embrace AI as a tool for augmenting, not replacing, human expertise.
   • AI can enhance productivity when used to support and not substitute for the skills of professionals in the industry.

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Speaker 1:0:02

Welcome to the podcast that is dedicated to providing insight, intelligence and thought-provoking conversations with members of the enterprise wealth management community.

Speaker 2:0:17

Chip Kispert. Here I’m the host of the Beacon Flash podcast, where I discuss the current state as well as the future of enterprise wealth management with its leaders. Past guests have included Salesforce’s Michelle Feinstein, sid Yenimendra, the CEO of Surge Ventures, and Frank McAleer from Raymond James. This podcast is brought to you by Beacon Strategies LLC, a go-to resource for enterprise wealth management firms and providers. We are a consulting firm that is dedicated to the wealth management industry. We help our customers understand, adapt and be more relevant in today’s dynamic enterprise wealth business. We bring three services to bear we host focus roundtables, deliver consulting services and provide gap products. In short, we help wealth and provider firms foster business growth and improve profitability. Recently, we helped one of our customers choose a new clearing firm and investment platform. Add to those bodies of work. We aided them as they reset their cash management economics. Our work helped them add millions to their margin. If you need some industry perspective or help, visit BeaconStrategiesLLCcom and don’t miss out on our exclusive podcast, the Beacon Flash for industry news and trends.

Speaker 2:1:41

Today I’m excited to have Jeff Moore on with me. He is the Chief Information Officer of Valmark Financial Group. He brings an unbelievable amount of experience to the table as well. He’s a friend. I’ve known Jeff for over 15 years. Notable recent highlights in Jeff’s career include holding positions on the FSI Operations and Technology Council. Additionally, in 2020, the Valmark MyCase team was a runner-up for Tech Team of the Year from the Greater Cleveland Partnership and finally, in 2022, he was selected to the Surge Ventures Industry Council for his expertise in cybersecurity and financial service. Oh, jeff, I am so excited that you’re here today. We get to talk about AI.

Speaker 1:2:33

Indeed, I’m excited too, chip. I know everyone’s been kind of talking about this. I’m glad we finally get to catch up and discuss this.

Speaker 2:2:40

So, Jeff, we’ve had a bunch of our roundtables recently. We’ve had a lot of discussion on AI. We’ve had a ton of discussion just on a daily basis. I’m getting that discussion, so you know, right off the bat, tell me a little bit about your thoughts on AI.

Speaker 1:3:00

Well, I mean overall, I’m pretty excited. As a technology, I think this is pretty exciting. It almost reminds me back a little bit when the World Wide Web started, you know, or at least people were starting to use it, maybe like 20 years ago, kind of more commercially. There was a lot of hype, but there was also a lot of stuff out there that was just wasn’t very good too. So I feel like we’re I don’t know if we’re quite at the top of the hype cycle just yet, but I think it is exciting. You know some of the announcements, like Microsoft’s co-pilot features, but I also think we’re still in the process of sorting out what’s going to provide real value still and what is just something that might be overhyped.

Speaker 2:3:37

So I agree with you 100%. You know, it’s fascinating when we sit down with wealth firms, right, they’re all excited, they’re super excited, but then you kind of start doing a little pick and shovel work and saying, all right, where, where are you going to use it? Right, and how are you going to use it? Um, and and that that draws a pause. There’s a pause there. So I think we are you know, we’re not even we are really young into this AI process. Do you see a lot of firms? Because you know this is one of the things that I noticed about you and maybe this is the better question I know you created an AI committee. Can you tell me?

Speaker 1:4:21

about that a little bit. Yeah, so, interestingly enough, I mean I wish I could take credit for the concept. It was actually a younger person in the organization that was in charge of a business line and he he was. He was reading all kinds of information about AI and he said, jeff, I, I really I want to start a committee, I want to get some other people involved. And I said, great, as long as you’re the one that’s willing to chair it. And he said, for sure thing.

Speaker 1:4:45

So it’s actually worked out really well, because I think one of the other things with some of this innovation and AI, I don’t think it’s going to necessarily come from, you know, somebody at the top of the house.

Speaker 1:4:53

I think it really is going to take some innovation from all different areas of the organization, right, somebody that you know knows their job really well and can then maybe apply some of this technology or think about it and how they can apply it to their job and then also teach their peers how to use this.

Speaker 1:5:08

I mean, one example is just even with what they call prompt engineering, or you can think of this as just you know how to put what type of terms do you put in the box and what kind of results are you’re getting. That’s a skill Like people are still learning how to do that, and some people are better at that than others, so I think it’s good to have committees that can have just a broad sense of what their jobs are like. And then also as part of this committee, I think it was really important that we included legal and compliance. I’m sure we’ll talk a little bit more about that later, but there’s all kinds of questions that are starting to come up in terms of sort of the legal and compliance components of AI as well. I guess, yeah, we’ll just leave it there for now.

Speaker 2:5:53

You know it’s fascinating because, you know, having had, you know, 20 enterprise wealth firms and seven providers last week in Austin, it provided me an opportunity to really think about, for about a day, what we see out there. As I said when we said a little bit earlier, people are super excited, but we also we look at it almost in three buckets. We look at bucket one being use cases, bucket two being regulatory and bucket three being security, and I think a lot of us see, oh, chat, gpt, and we get excited. It can write letters for us, it can do this. There are also some guardrails that we need to be thinking about.

Speaker 1:6:32

Yeah, yeah, yeah, for sure I’m thinking right. As you mentioned, there’s like two topic areas kind of popped off in my head right away, and the first is around, I’ll call it. We’ll start with the kind of the regulatory and then we’ll move into security. And so, on the regulatory front, there was a great case study that just came out from Air Canada, and if you haven’t heard about this story, what it was, there was a woman. Unfortunately she needed to attend a funeral and she needed to book her ticket very quickly and, for whatever reason, she didn’t have time to get the bereavement situation sorted out. So she asked the chatbot at Air Canada can I just book my ticket now and apply for the bereavement rate? Later Chatbot said sure, no problem, you can do that. She booked her ticket and then later Air Canada came back and said no, actually that’s not our policy, you needed to have that sorted out ahead of time. Well, she went ahead and sued Air Canada and won, and the finding was basically that Air Canada was responsible for the results of the chatbot.

Speaker 1:7:37

Now, why that’s so interesting now is we have a legal precedent saying that these chatbots are responsible for their answers, even if that differs from the official policy of the organization.

Speaker 1:7:41

So that’s, I think, could be an example of where people are starting to, you know, get some pause. The other part on the security front I think is interesting is it kind of ties in with regulatory is if people are wanting to use some of these larger systems like open AI and they’re going to use their APIs and that sort of thing, there’s a question of like okay, well, does my data go back into the model? And they’re putting some language around saying like, oh, it’s not coming back in the model, but do we know and do we have evidence that that’s happening? Is there a good audit function that we can trust? That I’m not sure is 100% in place. So if somebody is thinking about really sensitive uh that they have that they want to put through some sort of system, um, how do you know for sure, other than you know? They say they’re doing it, but are they really?

Speaker 2:8:29

we just don’t know yet yeah, you know you’re spot on because you know I look at the security aspect of it scares a heck of um, honestly, and that’s you know. I, I believe and I and I think you know, like you guys have already done, you created your AI committee right? I think that’s super necessary for firms, I think that helps with strategy, I think it helps with governance, all those pieces of the puzzle, and I hope to see more firms putting this type of the type of committee that you have in place. I think it’s great Thanks. So question there as part of that committee, obviously you do talk about governance, talk about security. How are you, you know, how are use cases coming?

Speaker 1:9:13

up. It’s interesting. So a lot of it’s just you know, we’ll have like an informal communication group where, as people are reading the news and coming up with things, they’ll say, hey, did you see this or did you see that, or I have this uh thing I want to try or I think could be useful. Can we experiment with this and test it out? Um, I will say I feel like it’s mixed. I feel like sometimes we we hit something and we feel like, oh, this is really really good. And then other times we’ll try something out and it’s like, ah, it didn’t quite live up to the hype. So I just feel I feel very mixed.

Speaker 2:9:47

Sometimes it’s like man spot on amazing, and other times it’s like oh, this is not what I thought it was. That’s funny, because, but what’s different than anything else? We have that in our daily lives, right? Oh, hey, great idea. Well, all right that one didn’t really resonate all that well yeah, yeah, absolutely.

Speaker 1:10:08

It’s like I’m so excited about microsoft copilot in so many ways, and then some of the things I’ve done with it blow my mind and others. I’m just like, oh man, I, I should have just done this the old-fashioned way.

Speaker 2:10:19

It would have been faster well, you know it’s funny because just little things right. So, looking at, you know, when we obviously we do a lot of video right, we look at teams and we look at zoom right, and the crazy thing, you got Microsoft co-pilot right, but yet to be able to get an AI summary of a meeting doesn’t seem to be in there yet.

Speaker 1:10:40

We, we don’t record our meetings, so we haven’t, and that’s more for regulatory legal compliance reasons. So, uh, I wouldn’t know, but I I do. I do know those tools are out there for, like zoom and other other.

Speaker 2:10:53

Yeah, it’s just the summary aspect we really like and everybody I talk to hey, you get a summary of a meeting. It’s great, um so another question for you, and this one is more Out of curiosity, and it comes from this takeaway we had from last week, which was that wealth firms are really looking to their partners, their provider partners, to help lead them in the conversation of AI.

Speaker 1:11:18

Do you agree with that? Yeah, I think so. I think a lot of these tools are going to have to be built by vendors for the majority of firms. I will tell you, I’ve spent some. I am a bit of a closet nerd and I’ve been trying to build.

Speaker 2:11:32

I never knew that.

Speaker 1:11:33

I know, I know I literally I’ll check it. If I move my camera I’ll show you. I got it. One of those Nvidia 4090 cards, put it in my uh, my, my desktop at work to try and build out my own GPT system based on documents. We have to kind of see what it could answer. And I’ll say, even though there are tons of open source items available, apis, all that stuff it is still not easy to then also do it in a secure, scalable way for enterprises. So I can definitely see, and that’s just one use case, right, that’s just like what they call a RAG system or a retrieval augmented generation type system. That’s just one type case, right, that’s just like what they call a RAG system or a retrieval augmented generation type system. That’s just one type of AI and there’s so many others and I think it’s hard, you know.

Speaker 1:12:15

I’ll give you another example. Like there’s a vendor we’ve been looking at that’s specifically in the life insurance space. It’s been doing some kind of interesting things and part of it it was they had to build these models, right, that takes a long time to just build the model. So I can see why vendors, a lot of it’s just going to take time to like train these models to work the right way. I know another one, rich Walker, that you’re friends with. You know he’s got a new product that they’ve come out with that they’ve trained their model on forms and helping to automatically pull data value out of forms and stuff. So I think that’s a good example of where you need partners Like that would be really hard for a single firm to do on their own. Something like that where there’s a lot of mapping involved, or something like that where you need a lot of model training.

Speaker 2:12:55

Yeah, no, it’s fascinating to me. I think, you know, one of the things we also kind of have come away with over the last few months is there almost needs to be a primer on all this, right, an overview, you know, an overview piece where people could really learn about the different aspects of AI and and you know the different types of models. You know I always love to ask those questions, so you know I, I obviously I talked to a lot of people in the industry, right, we’re, you know, we’re looking for insight as well. I’ve had the opportunity to talk about, you know, what Salesforce’s strategy is with Michelle Feinstein Really, really interesting where they’re going with it. Being able to spend some time with our mutual friend, sid Yedimendra, who with Surge Ventures and they’re doing some neat things with compliance, artificial intelligence who are some folks out there that you’re seeing, both as a provider and maybe, additionally, as you know, people that are are solving, utilizing ai and solving problems uh.

Speaker 1:13:56

So just a couple people maybe to think about. Uh, mark butler with his wealth management gpt and I know they recently they had that in pilot for quite some time uh, a chat gpt like tool that has some specific prompt for advisors to use. So I know he just recently was added to the Kitsies FinTech map. Jonathan Michael he just renamed his company AdvisorX AI. He’s been putting out a lot of material on LinkedIn and specifically around AI. Two other names I’d mentioned I’m local to Cleveland, so KeyBank is in our backyard. I’m not going to say his name, right. Azeem Shaikh. He puts out a to Cleveland, so KeyBank is in our backyard. I’m not going to say his name, right.

Speaker 1:14:32

Azeem Shaikh he puts out a lot of material from KeyBank, just kind of what they’re doing. He’s kind of on their strategy team, so he puts out a lot of really interesting thought pieces around AI. And then, lastly, I just got introduced to the Responsible AI Institute, which I think is also really interesting. So, less on the tech front but more on the sort of regulatory compliance front. I think they’re starting to put out some really good information. And I know Jackson National Life is in our space, the finance space, and they’re a member of the Responsible AI Institute, as a member of FOOT, so they’ve got some really good I think just thought pieces about some of the Responsible AI Institute as a member, so they’ve got some really good. I think just thought pieces about some of the more regulatory things we should be thinking about as we’re evaluating AI systems.

Speaker 2:15:16

Got it, got it. So you know, just big rocks right when you’re looking at what AI could do for your firm. What are a couple items that you’re taking away as hey, this is something we’re super interested in. And then, on the flip side, what are some things that maybe you’ve thought about but have seen data proving otherwise?

Speaker 1:15:41

So I will start with expectations around software developers, right, so I’ll put this in the overhyped category. I have a friend who they have a pretty large software development organization, so developer productivity is really, really important for them. And they were, you know their executive team was initially seeing you know marketing slides that were come out and saying things like you know, you’ll get 40 to 50% developer productivity. I mean that’s huge because typically these are, you know, high dollar resources. So what they did is they actually went out and had studies done by McKinsey, microsoft and others to see, ok, if we have, you do, an engagement, what can we actually expect as a productivity lift for our developers? And when they had to put their reputation on the line, those numbers came back at like 2% to%. So I mean not zero. So there’s definitely a role for some of these tools, but it might not be as big as people or some of these. You know people are touting but definitely, you know, I think even a two to 4% lift in somebody’s you know work output could be really good and I think what we’ve seen is especially with, like, younger developers, it’s very helpful, right, they can quickly, you know, don’t have to sort through a lot of different websites or YouTube videos, they can get the answer pretty quickly for kind of more basic things. As it comes to more like architecture, engineering, like that’s a complete different ballgame.

Speaker 1:17:03

So I think where I’m probably most excited still a little bit cautious, but starting to put some more effort into is, again, I mentioned a little bit earlier this RAG or retrieval, augmented generation. So this is like you can put your own organization’s documents into a chat GPT like response. So, for example, let’s say you have, you know, in our world broker dealer world, we’ve got written supervisory procedures, right. Some of these can be very, very long. What if you could put a document like this inside a system and people could just simply ask the question?

Speaker 1:17:37

You know, and the good thing is with these systems too, they often reference the document and even sometimes the page number from which it came. So there’s a little bit more tracking involved. With somebody’s asking the system it can be verified like okay, that’s, the document came from, this was the page number to go and check it. So I still think it’s kind of early to see if, if that would actually prove out, and some of it’s going to depend on the quality of the organization’s. You know inputs right If they’ve got good inputs or if they’ve got outdated documentation floating around.

Speaker 2:18:13

Fascinating, fascinating Closing question. You know we’ve we have a great deal of rhetoric going on with AI right now. As I said earlier, I don’t even think we’ve touched the surface. We’re hearing a lot of wealth firms are you know? They want to be the the providers to be their AI catalyst? Completely get it. You know. They want to be the providers to be their AI catalyst? Completely get it. You know, is AI going to get traction or is it going to be relegated to another one of those buzzwords? What do you think?

Speaker 1:18:38

It’s going to get traction, I’m going to go. I’m going to go on record as saying it’s going to get traction. I, I feel so. I’m just giving you in my perspective, like when we heard a lot about RPA robotic process automation I always kind of thought like, ah, this is a Band-Aid. Really somebody wants to do APIs. I get, maybe you’ve got some legacy systems. You know, that was an example I thought was kind of overhyped. I still think there’s a ton of potential out there with AI to help really accelerate both our learning and just how we do our day-to-day jobs.

Speaker 2:19:10

Fabulous, Jeff. Thank you for being a guest on the Beacon Flash podcast. Always love to have you here.

Speaker 1:19:16

All right, thank you, chip.

Speaker 2:19:18

We’ve been talking to Jeff Moore, who is the CIO of Valmark Financial Group, and it has been a real pleasure. If you need some industry perspective or help, visit BeaconStrategiesLLCcom and don’t miss out on our exclusive podcast, the Beacon Flash for industry news and trends. Have a great day.

Speaker 1:19:40

Thank you for listening to the Beacon Flash podcast. We’ll see you next time and be sure to click subscribe to get future episodes.