The future of financial planning lies in AI and Blockchain

by Arthur · February 9, 2023

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The integration of blockchain and artificial intelligence (AI) technology into financial planning and portfolio construction has enormous potential for efficiency, accuracy and security in the industry.

The use of blockchain and AI in this field could revolutionize the way financial advisors build portfolios and manage client information.

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Table of Contents

Financial planning

In financial planning, the integration of AI and blockchain technology could provide a much-needed upgrade. AI algorithms can analyze vast amounts of data to help make informed decisions regarding investments, taxes and insurance.

The algorithms can make real-time adjustments to financial plans, automate updates to plans based on changing legislation and reduce the risk of errors and fraudulent activities – all within seconds. This will lead to more efficient and accurate financial plans, freeing up time for financial advisors to focus on providing personal advice and improving client relationships.

Using the secure and transparent platform provided by blockchain, AI algorithms can also analyze and securely store sensitive financial information such as social security income information and tax information. This can enable faster and more accurate calculations, potentially leading to financial plans that automatically adjust in real-time without the need for manual updates.

Read more: Here’s why artificial intelligence-focused cryptocurrencies are significantly outperforming Bitcoin

Portfolio construction

Traditionally, portfolios have consisted of a mix of stocks, bonds, cash and sometimes a few alternative investments. But with the advent of NFTs (Non-Fungible Tokens), the future of portfolio construction may be changing.

NFTs allow the shared ownership and sale of all assets through smart contracts stored on a blockchain, potentially enabling portfolios to hold unique assets such as music albums, real estate, businesses, watches and artwork.

These new investment opportunities will allow clients of financial advisors to not only own unique assets, but to generate income from them in various ways.

Through NFT staking, a process where holders lock their NFT assets on a platform or protocol, clients can earn rewards for holding their assets and helping to secure a network.
Owning unique NFT assets that represent actual assets can also lead to passive income streams, such as rental income or royalty payments.
By fractional selling assets through NFTs, clients have the opportunity to liquidate part of their holdings and receive a lump sum in cash – a process that previously may not have been possible with certain assets.

All of this opens up new investment opportunities and brings us closer to a future where the average person’s portfolio may resemble a hedge fund or a venture capital fund. By exploring these cutting-edge technologies, financial planners and investors alike may be able to create a more diverse and secure investment portfolio with an extremely wide range of assets.

See: How AI could shape the future of the NFT market

Estate planning

Estate planning involves the creation and implementation of a plan for the transfer of assets after death and during disability. It is often a painful and expensive process that can be difficult to implement correctly.

With the integration of blockchain and AI into estate planning, smart contracts can be used to create, monitor and implement estate plans, potentially reducing the risk of processing problems. The use of AI algorithms in estate planning can provide real-time updates on changes in assets, the law and the market, enabling a more accurate and up-to-date estate plan.

Smart contracts on the blockchain can automate the distribution of assets and ensure that they are allocated according to the individual’s wishes, without the risk of fraud or human error. Blockchain can also ensure that all property-related information and transactions are secure, reducing the risk of data breaches.

Human versus technology debate

For several decades, the financial advisory business has largely remained unchanged. However, these cutting-edge technologies are set to revolutionize the industry and have fueled a human versus technology debate in financial advice for years.

The incorporation of AI and blockchain technologies into the financial industry will automate many routine and complex tasks, freeing financial advisors to focus on higher-value activities that require their unique skills and expertise.

Despite these advances, the human element of financial advice will remain critical. Customers not only seek knowledgeable financial advice, but also a personal touch, and financial advisors who understand the human behind the customer will continue to be in demand.

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Preparing for the future

Going forward, financial advisors will need to be proactive in preparing to effectively incorporate AI and blockchain technologies into their practice. They must consider not only possible implementations of the technology, but also their regulation and how it will affect their practice.

This means financial advisors need to stay informed and educated on the latest advances and developments in AI and blockchain technology and make necessary updates to their processes to stay ahead of the curve.

Equally important, advisors must educate their clients about the benefits and implications of these new technologies, and work with them to develop plans that leverage their investments. By staying ahead of the curve, financial advisors and their clients can reap the benefits of these new technologies while ensuring their financial plans remain efficient, effective and secure.

As the financial industry evolves and technologies evolve, the role of the human financial advisor will not become less important. The personal touch that technology simply cannot replicate will never be replaced. Financial advisors who are able to leverage new technology, stay abreast of the changing landscape around us – while focusing on improving their communication skills – will be at the forefront of the industry and well positioned for success in the years to come.