Empowering Financial Advisors with AI and Integrations

Today, financial advisors have access to huge amounts of data. Yet to analyze and benefit from that data, they would need more time than they have in a day. Here is when AI-driven technology comes in handy—it allows advisors to have better insights into client data, cope with unsure markets, maximize their productivity, and attract a new breed of tech-savvy clients.

In the previous article, industry influencers discussed with us why WealthTech companies need integrations. In this article, we will continue the discussion about WealthTech integrations and artificial intelligence (AI) with April Rudin, founder and CEO of The Rudin Group, Lex Sokolin, CMO & Global Fintech cohead of ConsenSys, and Timothy D. Welsh, founder and president of Nexus Strategy.

Does WealthTech really need AI?

Not every expert considers AI as a must-have for a WealthTech platform.

 “AI seems a bit too early for wealth management, but the potential is there—see FP Alpha.” — Timothy D. Welsh

However, we have observed multiple examples of AI being used by companies in the industry, such as Responsive AI, Broadridge, Wealth Dynamix, and ForwardLane. According to the WealthTech Trends 2020 report prepared by Xtiva, financial advisors leverage AI-driven technologies to remodel advice and provide scalable and ultra-efficient money management and goal planning services. AI allows advisors to improve the client experience by using client data effectively and responsibly.

 “I personally use AI-powered solutions for marketing, design, and segmentation analysis. I use several applications that generate graphics and images that are then incorporated into the marketing I do on the web and on social networks. I also use filtering and automation software like Zapier on top of dozens of RSS feeds to select content and information that is relevant to my audience. Financial advisors should be doing an analogous task of figuring out the type of messaging their clients expect from their financial stewards and therapists. The asset allocation work is only consequential to that relationship building.” — Lex Sokolin

Because the development of AI-based solutions is challenging, many companies prefer integrations with AI-focused platforms to empower financial advisors to make better-informed decisions.

 “It’s all about partnerships and teams instead of internal silos. I think that is the long journey that many firms have made to come to this new understanding of the importance of outside partnerships to propel firms forward faster.” — April Rudin

Lex Sokolin suggests that financial advisors may even use nonindustry-related third-party AI tools:

“There are still fairly limited uses for AI-powered WealthTech tools unless you are manufacturing investment products, selling through conversational interfaces, or dealing with a scaled customer base in need of segmentation. I would recommend that WealthTech companies leverage whatever tools the high-tech AI providers offer (e.g., IBM, Facebook, Google, Apple) and create contextual and smart use cases for their clients.” — Lex Sokolin

In this regard, API marketplaces become of great use for all industry players. There, WealthTech companies can find platforms that offer AI-based solutions as well as other WealthTech tools that may be integrated via APIs.

Hardships of integrating new technologies

Though integrations have become trendy, they are still challenging for many WealthTech companies. The most common problem is the lack of data standards.

“The worst issues are historic data integration and portability and seamless sign-on experience. Most of the time, new tools are designed as different experiences and have different data architecture. If you are not financially supporting these products through meaningful fees, then they are likely built on smaller budgets and have taken shortcuts to get you the visual experience. That will result in some data breaks and manual onboarding. So there is definitely a trade-off between being willing to just put something premium out there that works versus being more hands-on and willing to troubleshoot.” — Lex Sokolin

When it comes to integration with one more service provider, tons of new data should go through the ETL process to ensure that received data is stored in a standardized format and can be used by the system seamlessly.

“Universal data standards [can improve efficiency] so integrations become ubiquitous—but for competitive reasons, the custodians don’t want to cooperate, and this ideal will remain an aspiration.” — Timothy D. Welsh

If a WealthTech company has no expertise in integrations, a number of pitfalls may await its tech team as well as advisors using the platform.

“It is worth getting a consultant or advisor to help you get things done. Sometimes that consultant will be employed by the technology platform provider and will help you onboard for free. Sometimes, especially in the cases of larger broker/dealers, you will need to hire a consultant to run the integration process. If you find yourself paying a lot for a consultant to create spaghetti code on top of your existing systems to integrate a new player, it may be time to change your existing systems.” — Lex Sokolin

Every WealthTech company that plans to provide integrations should keep in mind that its main goal is to help advisors.

“In 2020, we are 15 years into the FinTech theme of personal financial management, starting with data aggregation, progressing to financial planning, roboadvice, integrated portfolio management, micro-investing, and now integrated tech-first custodians. You have to add value by being the best at what you do and having a strong opinion as to how you will improve your customer’s life.” — Lex Sokolin

Bottom line

If done right, integrations allow WealthTech companies to be flexible, improve user experience, and empower financial advisors to provide customized advice to their clients. Today, WealthTech companies offer manifold tools that may be integrated to make your platform competitive and beneficial for advisors. API marketplaces help you to facilitate searching for the best choice.