Alpha and the seamless advising experience of 2022

  • Facebook
  • Twitter
  • Linkedin
  • Email

June 27, 2017 - In a recent blog titled, “Out of the Dark Ages" we discussed how the future of wealth advising would be defined by a voice-driven robo advisor. To follow is a look at how such a virtual assistant will interact with clients and wealth managers by 2022.

Let's call this future marvel of next gen machine learning “Alpha." For customer convenience and clarity, Alpha will likely be the lone virtual voice speaking for a host of AI-facilitated advisory services (legal, medical, financial, etc.) to which a household subscribes. By providing human advisors organic opportunities to enter an ongoing robo-managed discussion at critical decision-making junctures, Alpha will make financial planning more personal.

This tomorrow is fast approaching.

Numbers already show robo advising is on an unstoppable adoption trendline. Like Tweets — which grew from 5,000 a day in year one, to 2.5 million daily after three years, and finally to well over 20 million an hour today — BI Intelligence expects assets under robo-advisor management to rise from the $200 billion recorded last year, to $600 billion this year, $1.5 trillion in 2018, and $4 trillion in 2019. By 2020, the figure will reach $8 trillion and account $1 of every $10 being managed.

Advisories that want to contribute positively to the creative disruption driving this robo growth will have to commit to a more integrated operating model. From their back and middle offices to their online and physical storefronts, the experience they shape must become seamless. In five years' time, those who succeed will offer a unique, highly transparent, high-tech, high-touch client–advisor interaction, which might look like this...

A week in the life of the 2022 financial advisee

After taking a red eye home the night before, Linda wakes late one Saturday morning. Her husband James has taken their son to a soccer tournament and won't be back until late afternoon. With a yawning sigh she calls out, "Alpha, updated family vacation options."

Alpha responds, “New information indicates two choices are now within budget: Hawaii and Paris." “What new information?" Linda asks excitedly. Alpha answers, “Factoring higher than expected yearly earnings released by your employer yesterday suggests a larger bonus than last projected. Should I look for a vacation package for Hawaii or Paris?"

“Not yet." Linda replies, at once excited about the potential for a vacation, but unsure of how well the family is keeping up with college and retirement savings. “How are we doing with our savings goals?" Linda asks. "Current status for college savings is on track. Current outlook for your retirement goal is trending below target," Alpha notes.

“Why below target?" asks Linda.

“Since moving to this house, maintenance and upkeep costs have gone up, so your retirement spending target has changed," Alpha responds. On hearing this, Linda asks for corrective options.

“Given you are 4% below the maximum, you may want to increase your retirement contribution," Alpha suggests. "For further suggestions, you may want to speak to your advisor again."

After noting that it's been nearly 6 months since the couple last sat with Michael, their wealth manager, Alpha inquires: “Would you like me to check yours and James's availability to speak with him this week?" “Yes," says Linda. Instantly Michael is pinged with suggested times that work for the couple, along with some initial analysis reflecting new information and plan options.

The advisor Michael promptly gets to work using a new set of life-change data points. Factoring in an improved bonus outlook for Linda and learning their son has received several Division I soccer full scholarship offers. During the hour-long, video-conference call that Linda and James take from their respective workplaces, the couple agrees to significant changes in their retirement plans.

The discussion with their financial advisor leads the couple to select a new investment vehicle that reduces their risk exposure while putting them back on track for their retirement goal. During the course of the video conference, an account is opened as the couple approves the necessary investment moves to implement Michael's suggestions. The next morning, feeling comfortable with the new forecast, Linda asks, “Alpha can we afford a week off in Hawaii this summer?"

A scenario like the previous one is likely to be commonplace by 2022. But as we've blogged before , this is a future that will only welcome the prepared. Later blogs in this series will cover what needs to be considered from the front to back office to prepare for this future scenario. While Conversational AI simplifies the user experience, in the background the AI utilizes language parsing technology, optimization algorithms, and predictive analytics, to name a few. The future version of today's digital advisor will usher in the retirement of wealth managers who can't adjust. For those who can, however, a far brighter tomorrow awaits.

This blog is co-authored by Boaz Lahovitsky, Senior Vice President, Wealth Management and Katherine L. Maher, Vice President, Wealth Management Product Development