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2 in 3 RIAs and fee-based advisors say AI will create a competitive advantage

Insurance Forums Staff

RIAs and fee-based advisors are confident that the use of Artificial Intelligence (AI) will give them a competitive advantage, according to new research released on May 23.

As AI continues to dominate the headlines and disrupt the status quo, a new Advisor Authority special report commissioned by Nationwide Advisory Solutions, and conducted online by The Harris Poll, shows that two-thirds of Registered Investment Advisors (RIAs) and fee-based advisors (66%), and a vast majority of the “early adopters” who currently use AI in their practice (94%), say that Artificial Intelligence will give them and their firm a competitive advantage in the financial industry.

Advisors are using AI to transform every aspect of the customer experience, attract a new category of future clients and open the door to an entirely new universe of products and solutions.

“Once the exclusive domain of large institutions with deep pockets, and more recently utilized by consumer giants such as Amazon and Apple to ensure ease-of-use and customer satisfaction, RIAs and fee-based advisors are now adopting Artificial Intelligence to enhance the human connection with clients—and gain an edge over the competition,” said Craig Hawley, Head of Nationwide Advisory Solutions. “Just as we are using Artificial Intelligence and advanced analytics to put the advisor at the center of everything we do, our latest research shows that RIAs and fee-based advisors are leveraging AI to understand clients, predict their priorities and provide personalized holistic planning—proving that putting clients first is the best way to drive greater growth and profitability.”

The Rise of AI: Harness the Benefits of Artificial Intelligence,” presents a 360-degree view—why Artificial Intelligence matters to advisors, what can be learned from the early adopters of AI, what’s most important to investors, and where these groups align—based on the responses of more than 1,700 financial advisors and individual investors.

It also provides actionable insights from experts in the field on using AI to create a competitive advantage and build a foundation for future growth. It concludes that Artificial Intelligence can enhance human advice — but is not likely to replace it — as investors continue to place a premium on trust, face-to-face communication and a personal one-on-one relationship. Other key insights from this special report include:

Adoption Low—But Poised to Grow

Artificial Intelligence uses advances in machine learning, including refined algorithms, predictive analytics, natural language processing, speech recognition and image recognition to assess big data from disparate sources, evaluate complex problems and help advisors make more accurate decisions. While adoption of AI is low, with only one-third of the advisors who are at least somewhat familiar with AI (33%) in this study currently using Artificial Intelligence, more than half of RIAs and fee-based advisors who are at least somewhat familiar with AI (51%) plan to integrate or expand the use of Artificial Intelligence in their practice over next 12 months.

Profiling the Early Adopter of AI

Meanwhile, among the early adopters, nearly 9 in 10 (88%) have added AI into their practice in past 12 months — and over 8 in 10 (84%) plan to add more over next 12 months. These early adopters, when compared to RIAs and fee-based advisors, are far more likely to say their profitability will increase substantially in 2018 (37% vs. 22%) — and more likely to say their financial outlook for 2018 is very optimistic (34% vs. 26%). They are also more likely to be among the categories of High AUM Advisors who manage over $250 million (15% vs. 11%), and High Earning Advisors with income of more than $500,000 (16% vs. 11%).

Improving the Advisor/Investor Relationship

Among the investors, advisors, and early adopters who believe that Artificial Intelligence will improve the advisor/investor relationship, there is alignment. All three groups say that the top ways AI will improve this relationship include increasing accessibility and affordability of financial planning (46%, 42% and 40%), and making accurate predictions about clients’ future needs and behavior (39%, 38% and 38%).

Top Ways of Using AI

The top ways advisors plan to use Artificial Intelligence over the next 12 months are centered squarely on serving their clients. RIAs and fee-based advisors — and Early Adopters to an even greater degree — say this includes protecting clients’ assets against market risk (37% and 50%), improving their understanding of clients’ current needs and behaviors (35% and 48%), predicting clients’ future needs and behavior (33% and 41%), and using AI to provide more personalized, holistic financial planning (27% and 36%).

Bridging the AI Divide

This report also reveals advisors’ unique opportunity to help clients navigate the unknowns, understand the benefits and bridge the “AI Divide.” While two-thirds of RIAs and fee-based advisors (66%), and the vast majority of early adopters (89%) say integrating Artificial Intelligence with financial planning will improve the advisor/investor relationship, only four in 10 investors (42%) agree. Likewise, only 42% of investors would describe their outlook on the impact of AI on financial planning as optimistic — and only 44% believe they will benefit from it.

Investor’s top three concerns about integrating AI with financial planning include cyber security risks associated with sharing personal and financial information (54%), privacy concerns about sharing personal and financial information (38%), and worries that AI gives technology too much autonomy (36%). Investors continue to say that face-to-face meetings are their preferred form of communication (37%) and regular in-person meetings are most effective for learning about their expectations (41%).

The fourth annual Advisor Authority study explores the investing and advising issues confronting RIAs, fee-based advisors and investors — and the innovative techniques that they need to succeed in today’s complex market. It features a special focus on the most successful advisors and the most affluent investors. These latest findings are to be followed by a series of ongoing reports that will be released through year-end 2018.

About Advisor Authority: Methodology 
The fourth annual Advisory Authority Survey was conducted online within the U.S. by The Harris Poll on behalf of Nationwide Advisory Solutions from Jan. 3-Feb. 21, 2018 among 972 financial advisors and 827 investors, ages 18+. Among the 972 financial advisors, there were 508 Registered Investment Advisors and 464 Broker/Dealers. Included in this group of financial advisors is a new segment of 212 Wirehouse Broker/Dealers that is excluded from trended data to allow for year-over-year comparisons. Among the 827 investors, there were 208 Mass Affluent, 206 Emerging High Net Worth, 208 High Net Worth and 205 Ultra High Net Worth. Results of this new research are compared to results from a similar 2017 and 2016 study conducted online by The Harris Poll on behalf of Nationwide Advisory Solutions. Investors are weighted where necessary by age by gender, race/ethnicity, region, education, income, marital status, household size, investable assets and propensity to be online to bring them in line with their actual proportions in the population.

About The Harris Poll: 
The Harris Poll is one of the longest running surveys in the U.S. tracking public opinion, motivations and social sentiment since 1963 that is now part of Harris Insights & Analytics, a global consulting and market research firm that delivers social intelligence for transformational times. Its mission is to provide insights and advisory to help leaders make the best decisions possible. To learn more visit www.harrisinsights.com.

About Nationwide Advisory Solutions: 
Nationwide Advisory Solutions, formerly known as Jefferson National, is a recognized innovator with a mission to help RIAs and fee-based advisors build their practice by helping their clients to potentially accumulate more wealth and reach their financial goals. The company does this by developing and delivering value-added investment products, services and technologies that fit the fiduciary standard—wrapped in an industry-leading customer experience. To learn more, please visit www.nationwideadvisory.com.

About Nationwide: 
Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the U.S. and is rated A+ by both A.M. Best and Standard & Poor’s. The company provides a full range of insurance and financial services, including auto, commercial, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; banking and mortgages; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com.



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