The Future of Client Portfolio Management
Discover how AI and ML are revolutionizing client portfolio management by optimizing financial plans, personalizing client portfolios, and automating portfolio tasks for advisors.
The impact of Artificial Intelligence (AI) and Machine Learning (ML) across all industries is real. But it seems a bit lazy to keep shouting in generalities about how AI is going to disrupt wealth management. I just don’t see advisors actively engaging with technology on their own.
AI and ML will be embedded into proven solutions. Advisors will need proof it works before they are comfortable reengineering their client experience.
Two mega trends stand out as key drivers of implementing AI through new solutions. Better use of client data and a continued focus on financial planning as the main value proposition of advisors. With that backdrop, AI and ML will help advisors do three things.
First, it will take the client’s cash flow needs from the financial plan and combine them with the firm’s capital market assumptions to determine the optimal client portfolio based on the plan, not an imaginary risk number.
Second, technology will help identify the personalizations and constraints for each client regarding taxes, risk and investment preferences. This creates an Investment Policy Statement for each client that applies to every investment decision. It creates guardrails to align the portfolio to the best interests and needs of the client.
Third, portfolio overlay technology will implement these custom rules and automate the time-consuming tasks of portfolio rebalancing, tax budgeting, tax-loss harvesting and managing cash in and out of accounts.
The benefits are game changing. The client has a portfolio that is completely aligned to the plan and fully customized to their preferences. The advisor now has an automated and consistent process for portfolio management that they control. This not only reduces compliance and operational risk, but it creates a more scalable and differentiated business model that unlocks capacity for growth.
