Spokane Journal of Business

Adviser AI: Technology’s role in financial management

Machine learning expected to assist, not threaten, say INW investment managers

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As artificial intelligence technology continues to evolve, it’s expected to improve efficiency for financial advisers, allowing them more time to build relationships with their clients, some advisers here say.

“In comprehensive wealth management, I feel like it all comes down to math and emotion. Artificial intelligence is and will continue to help with the math side of it,” says Jake Timm, president of Ten Capital Wealth Advisors LLC, of Spokane.

Data analysis, creating investment portfolios, identifying gains and losses, and identifying harvesting opportunities can all be time consuming for advisers, but AI can help improve efficiency in those areas, Timm says.

Despite the potential advantages that AI offers to the behind-the-scenes data analysis and management aspects of wealth management, advisers here agree that AI isn’t capable of replacing the human, relationship-building side of the business.

“One thing that AI has not replaced is those people with their unique situations and needing their needs met and having quick decision-making processes customized to them,” says Sarah Carlson, founder of Fulcrum Financial Group LLC, of Spokane.

Carlson’s associate, Jonna Damiano, a wealth adviser at Fulcrum, says it’s the one-on-one time between clients and advisers that separates AI technology from people in her profession.

“I don’t think (AI) goes into having those conversations about what’s important to clients,” Damiano says. “I don’t think that’s going to really replace it.”

AI can also be beneficial for client relations. Tim Mitrovich, CEO and chief investment officer at Ten Capital, says AI eventually will be able to help wealth managers measure client patterns, including determining when clients want to be contacted, for example.

“We’re seeing some technologies where we can put in certain inputs and client contacts and it can start to give us data back that helps us see how to better take care of our clients,” Mitrovich says.

John Adams, founder and managing partner at Alpha III Wealth Management LLC, in Hayden, also is using AI to improve relationships and reach the company’s clients.

“We’re using it more on the marketing, customer service, operational side of things,” Adams says. “AI is just able to help us develop more marketing tools, educational tools, and educational models.”

While some of the potential advantages of AI are enticing, Adams says Alpha III is careful not to dive into new technology too quickly.

“We want to be evolutionary, not revolutionary, because I think if you’re at the front of those, it can create a lot of problems,” says Adams.

Ten Capital also takes a cautious approach before adopting new technology of any kind, partially because of regulatory requirements for financial advisers.

“From a compliance standpoint, from our fiduciary obligations, we have to be very careful about how we implement new things,” Timm says. “We take that very seriously.”

Other concerns that Ten Capital, Alpha III, and Fulcrum leaders have about AI technology revolve around client privacy and data security.

Carlson says AI has made it easier for people to commit fraud and impersonate others, which presents a risk to wealth management firms. For example, people can use AI to disguise their voices to sound just like a person they want to impersonate, she says. Fulcrum relies on the systems it has in place to avoid fraudulent activity, Carlson says.

Adams says he’s wary of putting sensitive client data into AI systems because of the increased risk for data breaches. Those risks may make it more difficult for firms to use such systems to personalize client portfolios.

On Oct. 30, President Biden issued an executive order directing federal agencies to review and possibly draft new rules governing the use of AI across multiple sectors, including the financial services sector, the American Banking Journal reports. The order encourages regulatory agencies to use their authority to address financial stability risks that may arise from the use of AI. It also directs the Treasury Department to submit a report within 150 days on best practices for financial institutions to manage AI-specific cybersecurity risks.

While there is discussion within many industries about whether AI mechanisms will take jobs from people, the advisers at Ten Capital, Fulcrum, and Alpha III say they don’t see that being the case for them.

“Nothing’s going to be able to predict the future,” Mitrovich says. “In terms of markets, there’s been quantitative models running the bulk of trading for many years now.”

Adams compares some of the new technology to robo-advisers, which became available roughly 15 years ago. Robo-advisers are a type of automated financial adviser that provides algorithm-driven wealth management services with little to no human intervention.

“(Robo-advisers) did not impact our business at all,” Adams says. “It actually helped our business, because at the end of the day, a robot or technology cannot make up for the human touch and personalized service that’s provided by an adviser.”

In terms of AI technology that could be used at firms here, Timm says he could see in the next five years, pending regulatory outcomes, something as basic as a robust client portal where they can take all the investment data and planning data and be able to upload videos and commentaries all into one place.

“I’ve already heard of software that they’re attempting to develop where you may have a chat bot that looks just like us that pops up, and if a client wants to say, ‘Hey, can you get me the most recent 1099 for my tax professional?’ that it can handle that on our behalf,” Timm says.

As they would with any new product, Timm and Mitrovich say they’ll always make sure the technology works, it’s secure, and passes regulatory requirements, and communicate with clients to make sure it’s something they would actually want or could benefit from.

“I think you can get the best of both worlds from what AI is bringing, and what already exists from a technology standpoint, to take great care of clients,” Mitrovich says.

Dylan Harris
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Reporter Dylan Harris has worked at the Journal since 2021. Dylan, who was born and raised in Spokane, enjoys watching sports, cooking, and spending time with his family.

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