Artificial intelligence is giving wealth managers access to many of the same tools, data and portfolio-building capabilities.
Anthony Villis, director and co-founder of financial planning firm First Wealth, considers what advisers can still offer when technical expertise becomes harder to use as a point of difference.
He looks at the growing value of emotional intelligence, the effect automation could have on the training of junior advisers, and why some clients may eventually pay more for a service with little or no AI involvement.
For most of my career, our profession (financial planning and wealth management) has measured success by one metric: portfolio performance. Clients work with us because of our expertise, our institutional knowledge, and what we can do for their bottom line.
In recent years, this hard line approach to whether or not we’re doing a good job has softened. There’s more conversations about helping clients meet goals and live the kind of lives they want. Some of this shift is being driven by regulatory frameworks like Consumer Duty, as well as changes in our clients’ priorities. Still though, many firms still put portfolio performance at the heart of their investment strategies, and it informs much of the language of our profession.
Perhaps one of the greatest challenges to the status quo though is the increasing prevalence of AI in all of our lives. Change is inevitable in any profession but, for the firms still building their propositions around portfolio performance, the question remains: what comes next?
Artificial intelligence, emotional intelligence, and the commoditisation of the portfolio
AI adoption is in the process of commoditising the data that underpins every portfolio decision. That means that, very soon, AI will commoditise the portfolio itself. Let’s break that down step by step.
Every few months some new tool or platform promises to automate more and more of the wealth management process. Each one stirs up excitement, gets breathless coverage from the media, and then fades into the background. Specific releases and capabilities matter less than the overarching pattern. Everyone has access to the same set of tools, so the tools aren’t what sets you apart from the competition. More importantly, neither are the portfolios those tools help you build.
This leaves wealth managers and financial planners searching for a new way to stand out. It’s a crowded market and a challenging economic environment and in an AI-powered world, how do you differentiate your firm?
The answer is a different kind of intelligence. Not artificial, but emotional intelligence: the ability to understand what really matters to a client; the ability to manage emotions both in ourselves and others. A firm using AI to identify trends in data and highlight insights will be able to do it quicker than one that doesn’t. But, without a human to take those insights and share them with a client in the right way, all the AI-powered data analytics in the world are wasted time (and money).
Ours is a human profession. Client relationships need a human that can read the room, understand the person on the other side of the table, and have a real conversation.
I call the value of those uniquely human skills the ‘Human Dividend’. In our profession, AI is now just the table stakes. Everyone is using it, so the tech benefits aren’t unique. The Human Dividend is the only space left where we can actually compete and stand out.
This doesn’t just mean replacing 90% of the process with AI and putting a human at the end of the chain, either. I’m sure you’re familiar with the maxim “rubbish in, rubbish out”. AI can make you more productive, but it still has to do so in service of the right strategy. Otherwise, it’s just wasted time, tokens, and money. AI can’t replace the value that knowledgeable, experienced planners with high emotional intelligence bring to the process. In fact, it only increases the importance of having a human in the loop who can see what matters and what doesn’t.
The risks of blindly embracing AI
I’m not sure all the firms championing their use of AI fully understand this problem. If you’re all-in on AI, loving how optimised and efficient you are, how are you managing hallucinations and the risks they trigger?
Firms without a clear answer to this question face serious risks from a service quality perspective, not to mention a regulatory one.
In April of this year, one of the US’ most prestigious law firms, Sullivan & Cromwell, apologised to a US bankruptcy court after one of their filings contained false citations generated by AI. This wasn’t just a matter of incorrect dates or diluted legal meaning. The filing referred to a case that simply didn’t exist. It didn’t happen because the firm was being inattentive or irresponsible either. Sullivan & Cromwell has mandatory AI training, strict verification protocols, and a standardised review process. None of them caught the errors.
That’s a firm charging clients over £2,000 an hour, with industry standard safety procedures in place, getting caught out. If it can happen there, it can happen anywhere.
A human planner in the loop, interrogating everything an AI model produces (even a proprietary or closed model trained on the firm’s own data) should be non-negotiable. The risks are just too big.
Beware the disappearing ladder
Here’s the bit the profession isn’t talking about that concerns me.
The way we’ve always trained our advisers is by having juniors do the technical work. It’s the same in many industries; you cut your teeth on the repetitive, detail-oriented, nuts-and-bolts work until you have the kind of deep, nuanced understanding of your field that lets you make the big decisions. In our profession, you spend years doing cashflow modelling, suitability reports, and fund research until you’ve earned the right to sit in the room and lead the conversation. That’s the process that makes good advisers.
AI threatens this entire process. Because it can automate so much rote technical work, the jobs that would have been handed to juniors on the road to becoming seasoned advisors are fed to an AI tool. Very quickly, the bottom rungs of the ladder have started to disappear, with little discussion of what that means for our talent pipelines.
If we’re not careful, we’ll wake up in five years and discover we’ve automated the process that produces the experienced, emotionally-intelligent planners that help us stand out in the AI era. That contradiction isn’t something with an easy answer, and it’s a problem our profession needs to spend more time thinking about how to solve.
The non-AI premium
Mass AI adoption has another implication. In the next few years, we’re going to see the creation of an increasingly bifurcated market.
On one hand, ubiquitous AI-augmented advice means more people can get advice faster and cheaper. Anything that makes sound financial advice more accessible is a genuine good. It opens our profession up to new clients, and will help more people make smarter decisions about what to do with their money.
At the same time, we’ll see the emergence of a premium tier where the absence of AI becomes a deliberate, priced proposition. Data-cautious, higher net worth clients will want a guarantee that no AI touches their financial plan at any point. No AI-generated financial advice, no AI analytics, no AI-transcribed meetings. The human touch throughout the entire process will be a differentiator that I think we’ll see in greater demand.
It doesn’t mean that firms will need to pick a side. Pro- or anti-AI. Technocrat or luddite. It’s a new way to approach service architecture. Managing exactly how much AI touches a client’s portfolio requires proper ringfencing and guardrails inside firms. The clients that value that level of control will pay for it. The firms that can run AI-augmented offerings at scale and deliver an AI-free service where it matters will be the ones that see the greatest level of success in the decade to come.
The relationship is the product
AI tools are increasingly commoditising the portfolio and pushing for human-led emotional intelligence to become the next true service differentiator. This is going to change how wealth management manages success as a profession. This is going to put an even brighter spotlight on the relationship.
At First Wealth, we’ve spent years developing what we call Measure Wealth by Wellbeing®. This framework comprises the six pillars we think clients actually care about: what matters most, curveballs, the plan, financial independence, loved ones, and impact.
Don’t get me wrong; AI can do a lot. But it can’t ask a client what matters most and mean it. It can sequence a decumulation strategy; it can’t sit with the family when the curveball arrives. It can model financial independence; it can’t notice when a client’s definition of independence has quietly changed.
So much of our profession is irreducibly human. We cannot afford to lose sight of that.
AI has a place in our profession. But only in support of humans. Never as a replacement for what really matters. After all, it’s always been about people, and AI only makes that more true than ever.
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