The Advisor and AI

[3:36] Todd Cooper discusses three ways advisor-client relationships are changing
[5:38] The potential for AI to transform the usual advisor-client quarterly meeting
[7:27] Why advisors should start doing more for clients amidst evolving business models and expectations
[10:48] Todd’s predictions for AI in the next two to three years
[16:36] Early adopters and use cases of AI in wealth management
[22:53] Todd‘s guidebook for firms adopting AI

“AI is poised to learn and evolve at the client level, at the advisor level and at the firm level, over time.”
“The human element of advice is more important now than ever.”
“Doing more with less; advisors are being asked to do more, for more clients, and they probably have to do it for less money.”
“Adopting AI is different than adopting other technologies; the pace of change is dizzying, and technology fatigue is real.”
“I think the next generation of client relationships is going to require some breakthrough innovations.”

1. Embrace AI tools for client engagement: Use AI insights to refresh your preparation for client meetings. AI allows for highly personalized and relevant client interactions, addressing the need for deeper engagement.
2. Prioritize women and next-gen wealth holders in outreach: Develop communication strategies that cater to these growing client groups. By being inclusive and considerate, you will position yourself for success in the evolving wealth transfer landscape.
3. Adopt a flexible business model: Be prepared to consult on diverse financial aspects beyond traditional investments. This forward-thinking approach aligns with the industry’s shift towards holistic wealth management services, making you a competitive and adaptable advisor.
4. Listen to thought leaders and industry innovators: Keep up with the latest trends and use cases in AI for wealth management. Staying informed and inspired by those pioneering the AI journey in wealth management ensures you’re at the forefront of change.
5. Implement clear data governance and security: Ensure client trust as you integrate AI into financial services. Client trust is paramount, and clear data practices assure clients their information is protected as they engage with new AI features.

This podcast is brought to you by Beacon Strategies, LLC, a go-to expert in financial technologies.

As a new-age wealth firm management provider, we help you understand, adapt, and be more relevant in today’s dynamic enterprise wealth management industry.

With our suite of operational, educational, and practice management product offerings, we strategically synchronize your strategy with a robust infrastructure that fosters business expansion and profitability.

To learn more on how Beacon Strategies, LLC can help you align business strategy and vision, visit beaconstrategiesllc.com. And don’t miss out on our exclusive podcast Beacon Flash for industry news and trends.

Chip Kispert here… I am the host of Beacon Flash Podcast where I discuss the future of enterprise wealth management with leaders in the space.

Past guests of our podcast have included Sid Yenemandra, the CEO of Surge Ventures, and Geoff Moore, CIO of Valmark Securities. and Patrick Hannon from Fidelity Labs. And, most recently, we had Pem Geurry from Signix.

I need to add in a shout out to our work, as this podcast is brought to you by Beacon Strategies, LLC, the go-to resource for roundtables, consulting, and services that support wealth management firms and their 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 management industry.

Our work helps 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. Another project in flight is helping a customer explore digital books and records, onboarding and compliance surveillance options. For all, our work helped them add meaningful amounts to expand their margins.

If you need some industry perspective or help, please visit beaconstrategiesllc.com. Also, later this summer be on the lookout for our Beacon Provider Network rollout.

Today, I am pleased to have Todd Cooper on the show. Todd Cooper, is Chief Revenue Officer at TifinAG. Todd has been a friend for years and is a treasure trove of industry knowledge. His current body of work is at the intersection of wealth management behavior science and artificial intelligence.

Todd’s accomplishments are many, but a few include:

• At Prudential, Todd helped launch one of the industry’s first multi-currency capable unified managed account platforms.

• While at Envestnet, Todd was instrumental in one of the industry’s first “OneWealth” solutions that unified portfolio management across trust, advisory and brokerage silos. He helped create and scale a group of financial wellness exchanges that integrated annuities, credit solutions an trust services with investments and financial planning.

• At LPL, Todd spearheaded a new institutional channel focused on providing outsourced wealth management solutions to adjacent wealth businesses of product manufacturers.

Todd, Welcome to The Beacon Flash Podcast.

Question #1) So, how do you see relationships changing in the retail wealth space? Specifically, how advisors and their clients interact?

Q1 Relationships Changing

Summary

They are being asked to provide more holistic services, to more clients for less.

With advisor populations continuing to decline while the great wealth transfer kicks in, they face enormous challenges.

Relationships are changing in three fundamental ways

1. Control continues to shift to clients
2. AI will transform how advisors and clients engage
3. Communication is evolving – hyper-personalization is now table-stakes
PART 1 Control Shifting

Control continues to shift to clients

I believe Investors are in the Driver’s Seat more than ever and advisors are facing three primary challenges. Control is shifting to the investors or clients.

Advisors must 1) do more for 2) more clients for 3) less money.

DO MORE – The Advisor Value Proposition is Evolving advisors are being asked to provide or consult on holistic wealth services that can be hyper-personalized for each client. Clients have abundant choices, flexibility and access to a range of solutions and services at all wealth segments

MORE CLIENTS – we are seeing more clients coming into the world of advice as access to solutions and services are more accessible and scalable given the innovations across our industry. I believe having an advisor between a client and their wealth is still critically important. At TIFIN, our mission supports this with our goal of helping to bring more people into the world of advice.

FOR LESS MONEY – fee compression continues within the ongoing industry consolidation and with services that are.

PART 2 AI Disruption & Transform

AI will disrupt and transform how advisors and clients engage

Looking back, advisors working for larger firms decades ago had the advantage of scale. TAMPs and other accessible technologies leveled the playing field. My prior firm Envestnet was founded on this concept of democratizing wealth management for all advisors.

Today, we are still in the early days of another era of transformation, driven by Artificial intelligence. No secret there.

Leveling the playing field

AI-powered solutions enable a level of scale and personalization that presents the opportunity for smaller firms to more effectively compete with the larger scale players if they adopt early and stay ahead of the innovation.

Solving Long-Standing Problems with new innovative solutions

Technology innovations are poised to help more now than ever before. With the emergence of commercially available Artificial Intelligence Solutions, advisors can solve long-standing problems such as organic growth and client communication with these new capabilities.

PART 3 Communication is evolving
Communication is evolving, hyper-personalization is now table stakes

The notion of meeting quarterly to review portfolio results is already obsolete with investors having access in real time to their financial life with a swipe of their thumb or click of their mouse.

The industry is still not where it needs to be to scale those hyper-personalized experiences and make them common place but it’s coming fast.

I believe instead of looking at portfolio and planning results – the communication approach of the future will be driven by answering and predicting a series of questions that are unique to each client on a more frequent and ongoing basis.

Clients have questions, and won’t want to wait to call, text or meet with their advisors quarterly for those answers, they’ll want more immediate insights.

The emerging AI technology will be table stakes to help drive this transformation.

Just think about how “hey Siri” and the use of voice have changed how we all access information and get answers to questions in real time. That‘s coming to wealth and in many ways, it’s already here.

I’ll share two examples we see at TIFIN that are representative of how the advisor / client interaction is already changing.

Example 1 – the client review meeting

SCENARIO

Typically the meeting is set, the client meets with the advisor and reviews what’s happened over the past quarter, they discuss any changes to life/work events and update the financial plan accordingly.

All are still relevant and all still very important – I mean the human interaction and relationship between advisor and client.

CLIENT PERSPECTIVE

What if AI can answer most if not all of the client’s questions in advance of that meeting at a reading level set by the client not by how the advisor communicates.

At TIFIN, one of our companies Magnifi offers investors an

CLIENTS

AI copilot that sits atop any linked portfolio or across the entire household of accounts across workplace, advisory and brokerage.

Investors can ask questions, much like how “Hey Siri” works and receive responses about their portfolio. That’s immediate, it’s right on your phone and it’s hyper-personalized. Future questions learn based on previous interactions so the client becomes accustomed to insights on their terms.

That type of technology is quickly becoming available not just for retail investors, but equally for advisors and the home office teams that support them to navigate and get answers to a wide range of topics across wealth.

ADVISORS

At TIFIN, we have another company, SAGE, that offers a similar

AI co-pilot for advisors to perform similar queries and provide portfolio feedback that reduce prep time and offer more personalized insights so the advisor is ready for a more productive experience when the client walks through the door or arrives in the zoom meeting room.

This type of AI also learns and improves over time as investors and clients interact with the tech, moving to predict what will be asked before the next query emerges. It will nudge a client or advisor via email, text, phone call, or via dashboard to encourage digital engagement much like how products or movies are rendered in Amazon or Netflix platforms.

How would that change the quarterly review meeting?

Example 2 – Capturing More Wallet Share

Let’s think about that same review meeting from a different lens.

The advisor is managing the client’s portfolio and may or may not have an understanding of the client’s total net worth or investable assets.

Most advisors would desire to manage the majority of the client’s assets leading to a deeper relationship, supporting more planning goals, and building relationships with the next generation.

Advisor capture this understanding via financial planning and data aggregation

How many advisors do this across their entire client base and know where the best consolidation opportunities exist continuously?

How many advisors are equipped to identify and then ask the client to consolidate more assets with them at the right time when there’s money in motion?

AI is here to make this a common practice.

Advisors now have access to growth signals that predict the magnitude of a client’s held away assets and their propensity to have money in motion events over the next 3, 6 or 12 months.

These are predictions rooted in data science based on analysis of clients’ financial behavior and coalescing of data from multiple sources.

The human element remains but the AI is guiding the advisor with speed and precision to make it easier to bring this up during their interactions.

Example 3 – Client Referrals

Referrals are of course a common practice. What if advisors could completely transform popping the question about asking a client for a referral.

Imagine that same client review meeting where the advisor explains to the client that they are trying to grow the business and bring on more clients. Instead of asking “do you have anyone in mind that looks like you”, the say “ Do you know Chip Kispert?” Chip is someone that I identified as a potential new client and I believe you sat on the same community planning committee or sat on the same chartable foundation board with him or you both worked for the same firm last year”

The AI may not know whether the client will refer Chip but it will likely improve the probability of a more personalized referral that leads to a new client.

When advisors begin to leverage AI powered solutions, they’ll be well served to focus on specific use cases and stay focused

Will they adopt solutions to help with organic growth, to improve productivity and personalization, optimize workflows or a combination of all of these.

Question #2) How does changing relationship expectations impact how advisors are running their businesses? We have seen a great deal of acquisition, is that impacting how advisors are managing their businesses?

Q2.1 Changing Relationships Impact on Running Business

I believe many advisors will increasingly need to adapt in order to work differently with a more diverse set of clients.

One area of adaptation will be the type of clients advisors will interact with more looking ahead then who they’ve typically engaged with historically.

Women and GEN2 client relationships will be more important than ever to master.

Women as the primary advisor relationship contact will increase – as they stand to inherit more and more assets. They may have not been as involved historically and will require new skills sets beyond being a great financial planner or advice provider.

Managing those relationships will likely require evolving how meetings and ongoing interactions are conducted.

GEN2 – this is another example

how advisors engage with the second generation – if they are smart enough to build those relationships before a wealth transfer event occurs – will likely be different than how they engage with the older generation.

I’ve witnessed both examples recently in my own life with my parents and through friends who have sadly passed recently.

Let’s take parents. I’ll consider myself GEN2 for this conversation – an example where my mother’s advisor has not even tried to build a relationship with me to engage with what’s happening in her portfolio or to review estate planning considerations

Now, she’s healthy, she has a great relationship with her advisor and, I’d consider her an at-risk client. Once again, the emergence of AI tools can help advisors predict retention risks and identify GEN2 opportunities well ahead of a client leaving.

With a potential increase in more women and younger generation as the primary client, I go back to how AI tools can help advisors with this transformation.

Q2.2 How is acquisition impacting how advisors are managing their businesses?

I believe it’s a choice advisors continue to have in front of them?

From what I’ve seen, advisors have to make a choice.

Do they want to maintain a level of control and culture of running their own practice or do they focus on joining forces with a larger firm that already has scale to help them focus on delivery advice, while they let larger firms handle the necessary activities to run a business

For firms looking to sell,

the opportunity to accelerate growth using new innovations, namely AI powered solutions, can improve valuations and give those advisors greater options when reviewing offers

For the aggregators,

typically with outside and private equity ownership, AI innovations are poised to help fuel organic growth that can improve ROE and ROI

Question #3) What makes a business less valuable? What are three skills/actions that owners of advisor firms should be addressing to build a more valuable business?

Q3.1 What makes a business less valuable?

Several factors come to mind

Less predictable, recurring revenue
Less advisor development
Lack of specialization or focus on specific client segments –

Q3.2 Three Skills / Actions for more valuable business
What are three skills/actions that owners of advisor firms should be addressing to build a more valuable business?

Expanding wallet share with existing clients
Building relationships with the next generation
Creating greater scale and efficiency.

Wallet Share & Retention

Not all businesses may focus on organic growth. Given the aging advisor demographics, there’s a contingent of advisors in the “lifestyle practice” mode. For those advisors, the opportunity exists to capture more wallet share, retain and expand houselhold relationships with the next generation.

Given what’s already occurring with the great wealth transfer, advisors can get more proactive to identify growth and retention opportunities using AI innovations.

Almost daily we hear about the ability to enable hyper-personalization at scale. That’s the industry buzzword factory talking but it’s important. I’d prefer to think of this as creating memorable, authentic experiences.

Long standing challenges solved using new capabilities

Creating greater scale and efficiency.

If AI solutions can reduce the time to prepare for a client meeting from a hour to 10 minutes, think about how that can help scale, create efficiency and enable growth opportunities. It’s no longer just a hypothesis or a theory, it’s here.

Bonus Question: How many Dave Mathews shows have you attended?

I’ve lost count but I guess over 80 is a good estimate. I’ve been seeing them multiple times a year for the past thirty years. I’d estimate over 80 shows and counting. I’ve even converted my daughters and a few weeks ago was our first family show. It never get’s old and is one of my happy places.

Question #4) What are a few companies that you see out in the marketplace that make you go wow, they are innovative. Who do you listen to as a bell weather to the trends impacting wealth management?

Q4.1 Innovative companies
What are a few companies that you see out in the marketplace that make you go wow, they are innovative.

Several come to mind – all have common traits

Early adopters, growth mindsets, courage to take intelligent risks, invest in innovations and a willingness to experiment

Looking across the three asset locations of where wealth exists – advisory, brokerage and workplace

RBC Wealth

Innovation – Using AI to observe client behaviors and patterns to identify those who might have money in motion following a significant financial event.

Result – Capture more asset from existing clients.

SEI

Innovation – equipping advisors with AI co-pilots to better understand behaviors and activities within a client portfolio for

Result – efficiency to manage more clients with more personalized client engagements.

Franklin Templeton

Innovation – help employee plan participants assess their workplace benefit plan options and receive automated investment advice on contributions and allocations.

Result – helping clients take the mystery out of available benefits with a more personalized approach

Hamilton Lane

Innovation – helping advisors navigate the alternative investment landscape to more precisely assist with advance portfolio construction

Result – helping advisors manage high net worth relationships with more precision more efficiently

Q4.2 Who do you listen to?

Who do you listen to as a bell weather to the trends impacting wealth management?

Vinay –

First, I work for TIFIN of course. So I listen to our CEO Dr. Vinay Nair as he speaks across the industry.

Vinay has been at AI for almost a decade before most began making it a priority. His insights are incredible not only about the specifics of AI for wealth but how he always seems to provide a historical context for the evolution of technology and how it’s posied to continue to transform the world of advice.

Jack Sharry

Next, I really enjoy Jack Sharry’s Wealth Tech on Deck Podcasts.

Jack’s been in the industry forever and he does a great job of consistently getting leaders in our industry to discuss the confluence of human and digital advice from their personal experiences and how they are transforming and improving wealth experiences for the advisor and clients they serve.

Digital Wealth news

Last, I’ll give a shout out to Digital Wealth News – it’s a weekly must read to stay current on what’s happening with all things AI across our industry.

Question #5) Looking at the space that you have dedicated your life to, what wakes you up in the middle of the night? What are the pitfalls that you want to see wealth firms avoid?

Q5.1 Wake up in the middle of night?

The question you did not ask is what get’s me up in the morning….

Bringing more people into the world of advice and empowering the noble profession of financial advisors.

What wakes me up is the same thing at times that get’s me out of bed….

The constant pace of change and transformation across our industry.

There is a technology fatigue that continues to exist that is always a concern

What are the pitfalls that you want to see wealth firms avoid?

Intertia. I want to see more firms lean in to be early adopters to growing at the edge and get out of their traditional comfort zones

Expense vs. Investment – AI is commonly viewed as a net new expense vs. an investment to achieve a better outcome or ROI

Keep the client at the center of every decision – obvious but could lose sight.

The Last Fog Horn Blast – ONLY 60 seconds to share a thought-leadership topic that you believe is insightful. Does not have to be about TifinAG. Think OpEd.

We are still in the early days of AI in wealth management. Adopting AI in wealth management is different

2023 was the year of AI intrigue,
2024 will be the of experimentation and pilot programs,
2025 will ultimately be seen as the tipping point for adoption.

The pace of change is dizzying,

Wealth firms of all types will be looking for trusted partners to help them get in the game and marry the potential of AI to their unique value propositions.

Firms should focus on very specific use cases – pinpoint the specific problem you need to solve and see it through

Experimentation and resiliency is required – expect results to evolve over-time as the AI learns based on usage and outcomes

Data governance, security, and privacy are critical

Understand the differences of Supervised vs. Generative AI

Know the impacts on each stakeholder – the firm, advisors and end-clients

Todd, thank you for joining me on the Beacon Flash Podcast. Thanks for bringing your digital signature know how to the show.

Closing

It has been a pleasure having Todd on the show. Here are three take-a-way thoughts that I have on what Todd shared on the show:

1) Advisors are trending toward being holistic financial coaches. Advisors are being asked to do take on more and more, and that includes providing advice and insight on investments, insurance, and sometimes banking/lending. And, healthcare may soon be added to that mix.

2) AI will assist how advisors prepare and personalize customer service.

3) Changes are fast coming when it comes to servicing with women and second generation being or having more of the voice.

Again, I want to thank Todd Cooper, Chief Revenue Officer of Tifin AG for being on The Beacon Flash Podcast.

Please keep tuning into our exclusive podcast Beacon Flash Podcast for industry news and trends. Until our next episode, this is Chip Kispert.

May you have fair winds and following seas. Be well!