A firm’s next hire should be AI, says Fintech Exec

by James · March 28, 2023

Artificial intelligence is not magic, and the advisory industry is early in its exploration of its use in investment management and client services, said Howard Getson, president and CEO of technology consulting firm Capitalogix in Coppell, Tex.

Indeed, to date only Morgan Stanley has jumped in with both feet, and a serendipitous relationship with OpenAI, the technology company that launched ChatGPT last November, has led the two firms to create a bespoke AI solution that scans Morgan Stanley materials only for use by advisers and employees.

For everyone else, how, when and what an advisor adopts in AI is going to vary, Getson said.

“It’s about incremental progress towards the inevitable, and let me tell you, AI is inevitable. It’s going to change everything, he said, speaking at last week’s Advisor Growth Summit sponsored by Financial advisor Blade. “Automated trading, risk management, looking at sensible diversification, finding new opportunities, playing offense, playing defense, using it to review policies to find out where you’re lacking coverage – so many different things. But the point is that you are early.”

Getson said that while everyone is talking about ChatGPT at the moment, it’s just one of the ways AI can be leveraged, and the pace of change is so fast in this field that soon there will be many other options, all doing slightly different things.

So while ChapGPT is exciting, he said, it’s just a tool and just a single point in time. The rapid development of the AI technology behind the ChapGPT tool is what is going to have a significant impact on all businesses, including the advisory business, he said.

“AI is going to radically change the way you work, the way you live, even how long you live, and not least your entire practice,” Getson said, adding that advisors who may feel behind this technology, not have to worry about. “You are not behind. You don’t have to be afraid of missing anything. You don’t have to think “How do I do what someone else said they could do with it.” The tool is going to get better and better and better.”

With this technology, he said, advisors just need to take steps in the right direction, stay focused on what they want and the ways this technology will help them get it, and not obsess about what the “ideal” looks like.

For many advisors, he said, the focus will remain on their client relationships, as less than 10% of the value of AI to the advisor community is in the base technology. The real value is that it will free up advisers to focus on the things that create the most value for the firm, he said.

“Only you can decide what that is. You have to figure out how to automate the right things,” he said.

For advisors to get what they want and need from their AI, they need to get it customized. And no matter what, compliance will continue to require advisory oversight of the technology they use.

The starting point for an advisor can vary, Getson said. One advisor might choose to start with money management, while another might want the AI to start by looking at client account allocations and showing them opportunities and risks, or it might be marketing or communications automation.

“The bottom line is the possibilities are endless and you just have to pick a starting point,” he said, suggesting that advisors automate the things that are predictable so they can spend their time drawing clients’ attention to the things that deserve to be highlighted .

Above all, he said, while AI is very cool, “artificial stupidity” is very scary. “You don’t want to make mistakes at the speed of light with real money,” he said.

Starting

Getson said the best way for advisers to get started is to think about what they want and work backwards. So if an advisor wants better relationships with clients, maybe use AI to catalog their needs and present a program to check those needs.

Four questions will help advisors have specific goals with AI:

What do you want in 3-5 years?

What milestones do you need to reach?

What limitations will you face?

What skills do you need?

And understanding the three ways AI can help will guide this decision-making process. First, AI can serve a support function, helping advisors and staff complete tasks more efficiently and with greater accuracy.

Second, AI can be used as an amplifier, where it performs individual steps in a more complex process where a human supervises.

And third, AI can add automation, where it performs complex multi-step processes so that humans have more time to focus on something more important that AI cannot do, such as talking to clients.

“You can’t just say, ‘I want to automate my practice,'” Getson said. “You actually have to think about a lot of things in your practice to figure out what’s worth automating. This is about rich opportunities. AI is going to free you to be more human.”

When delineating what the firm needs from its AI, advisors should consider whether this piece of technology is something that will fill a general role, or a specific role; whether it should observe or interact; whether it should be risk-averse or opportunity-seeking, or both.

Training of “New employees”

And finally, advisors looking to bring AI into a firm should be aware of the steps that need to be taken and tested to ensure that this “new hire” works. This is the adjustment part of the adoption.

The first grunt work:

Step one: gather all the data the AI needs to do its job.

Step two: clean and improve the data to avoid the “garbage in, garbage out” maxim.

Step three: organize and structure the data.

The fun stuff:

Step four: let AI rank and evaluate choices. Correct what needs to be corrected.

Step five: let the AI make the recommendation. Correct what needs to be corrected.

Step six: let the AI choose an answer. Correct what needs to be corrected.

Step seven: let AI have autonomy in decision-making

“The cool thing is, you don’t have to pay the technology more to be there 24/7, and it can give you an automatic advantage because it looks at every tick in the market, every opportunity, every transaction, and it can protect a portfolio one trade at a time, Getson said.