How Will AI Transform Financial Services?

Are Investors Bullish on AI?

As new technologies reconfigure the financial landscape, most clients believe AI will help, not hinder, advisors in their business.

Investors are bullish on financial advisors using artificial intelligence, and fintech companies are racing to meet the demand.  

Most investors believe AI will help advisors better serve their clients, according to a recent survey by Morgan Stanley Wealth Management. Thus, investors confirmed that they would be interested in working with an advisor who leveraged the technology, with investors between the ages of 35 and 44 expressing the most enthusiasm.

However, the study also found that most investors don’t believe AI will fully replace their advisors, and they agreed that building real advisor-client relationships is still important.




How Powerful Will AI Be for Advisors?

According to Jeff McMillan, head of analytics, data and innovation for Morgan Stanley Wealth Management, while AI is clearly groundbreaking, and we are just scratching the surface of its potential impact within financial services, this data illustrates a truth we’ve known for some time, the clients who are most engaged with their financial advisors are also the most satisfied. Within this context, AI should be viewed not as a replacement for human input, but as a powerful tool to help turbocharge a financial advisor’s practice management and client interaction capabilities.

Morgan Stanley is one of several firms that already have an AI application on the market for their advisors. The company was an early partner with OpenAI and is using its GPT-4 technology to create an internal chatbot that advisors can use to query Morgan Stanley’s library of proprietary content.

They have been joined by Morningstar with the generative text AI “Mo,” which debuted at the company’s annual conference in April. Mo will be available across Morningstar’s flagship products, including Advisor Workstation, at no extra cost to advisors.


Learning How to Leverage New Tech

Built using Morningstar’s investment research library and Microsoft’s Azure OpenAI service, advisors can use Mo to surface and summarize insights and analysis in a conversational format. James Rhodes, Morningstar’s chief technology officer and president of data, research and enterprise solutions explains that if a client comes in with a question about a specific investment, an advisor can query it into Mo and get an answer based on Morningstar’s research and editorial content.

Rhodes thinks that we’re in a world where there is so much data and so much information that sifting through that to separate out the signal from the noise is becoming increasingly challenging.

The current swell of AI technology is a pivotal moment in the history of technology, akin to moving written content onto CD-ROMs in the ’90s, or uploading CD-ROMs onto the internet in the 2000s.

This is very similar to that type of moment. It is an opportunity and a transformative technology for the industry. We need to learn how to leverage the new tech in a responsible way that is really going to unlock the benefits of it and help investors be successful in assisting their clients.



The Limitations

Responsible use is really key, because AI has demonstrated the ability to do impressive tasks but has shown to simply make things up. ChatGPT, in particular, frequently produces factual errors when prompted for facts, inventing entire studies and data sets. With this in mind, how can financial advisors trust it with compliance issues that are plagued with liabilities for them and their clients?

The answers provided by these services are unreliable to say the least. However, the companies that implement these new tools have guardrails in place to help them be more accurate than consumer-facing AI programs. For example, like Morgan Stanley’s AI, Mo only pulls from Morningstar’s internal data, not the entire internet. It also puts constraints on Mo so that it can only answer questions related to finance.

Companies try to make clear choices over which partners they are going to use and how they are going to implement a system to make sure data is secure and private.

In addition to Morgan Stanley and Morningstar, Riskalyze, FMG Suite, Hearsay Systems and Orion’s Redtail CRM have all introduced different forms of AI functionality for advisors.  


RiXtrema offers a wide range of financial tools to our clients. Our Portfolio Crash Testing (PCT) tool helps financial advisors determine the best way to adjust clients’ portfolios to reflect their values and needs. Also, RiXtrema helps financial professionals supercharge their financial advisory practice with AI.

You can learn more about our products and services on our website and sign up for a free trial for any of the tools.

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