Artificial Intelligence (AI) has entered Wealth Management at a time when the industry is trying to reinvent itself to become more client-centric, transparent, and free from asymmetrical standards. The portrayal of AI and robots managing client money is the removal of a human advisor. We believe this is a mistake and we are nowhere near removing the human factor from financial advice.
Human advisors—including here at True North Advisors—are increasingly using portfolio automation to implement financial advice. This is particularly helpful with portfolio rebalancing, for example, which ensures that your strategic portfolio allocation remains consistent despite market fluctuations. True North utilizes Schwab’s Institutional Intelligent Portfolios (IIP) platform, which is highly efficient for an investment manager because much of the blocking and tackling is automated. The two most important two benefits are:
- The chance of human implementation errors is greatly diminished
- Portfolios are monitored continuously, rather than just during business hours
Just the same, we think Schwab’s IIP also encourages transparency, which promotes better engagement between the client and the advisor. This empowers the investor to own more of their financial future and helps the advisor focus on providing advice, rather than wasting time on routine tasks. In sum, the client and advisor can focus more on strategic financial planning, which is the highest value service we provide.
Fund managers have used investment and portfolio automation for years, yet only recently has it become available for advisors and their clients. Automation has also given rise to the popularity of robo-advisors. As we have written in this space previously, we think robo-advisors are a great tool for new investors, but they cannot provide advice for those with nuanced financial situations. Still, our use of Schwab’s IIP provides many of the benefits of a robo-like experience, coupled with the advice element that is critical for a high net worth investor.
Complementary with advice, portfolio automation technology can do amazing things, including enhancing the human element. The time spent with clients on a personal level increases with the addition of technology, to the extent that routine tasks can be automated. We believe this leads to better outcomes for investors because it enables the advisor to spend more time providing advice, which can help clients in many ways, not the least of which being when markets are experiencing volatility. While we believe that portfolio automation has clear benefits, when it encourages more human connections that is the greatest benefit of all.