Customer experience and effective financial management are top concerns for advisors when considering adding new, advanced technology. How can a robo-advisor or AI be trusted to put the customer first, navigate complex situations, and provide the same level of customer experience that a seasoned advisor may provide?
In order to responsibly and effectively leverage a robo-advisor within wealth management, these ethical considerations must be addressed. The algorithms that govern robo-advisors and AI can perpetuate biases—especially when left unchecked. Wealth managers must ensure transparency and fairness in AI-driven decision making and in the ways that they leverage AI to support wealth management services. As robo-advisors are more widely adopted, wealth managers must learn to embrace AI solutions and simultaneously balance the relationship-driven experiences that connect them to their clients.
Data Privacy and Security
One of the main concerns with robo-advising and artificial intelligence is data privacy. The same security requirements that exist in the context of banks and other financial institutions must apply to the use of robo-advisors. Where robo-advisors alleviate some of the administrative burden that rests on wealth managers—by automating essential processes—wealth managers must reinvest that time to ensure that advisors are acting properly and in the best interest of clients.
For robo-advisors and artificial intelligence to access bank accounts and other financial information, they must be data compliant, adhering to a wide range of privacy laws, legal frameworks, and best practices. This information must be available to clients and easy to access.
Transparency and Visibility
Even for clients who are on board and open to automated portfolio management through a robo-advisor, there may still be concerns about how that money is managed. Transparency and visibility are key to mitigating these concerns. Educate clients about the merits of robo-advising—how the technology was built and trained and how it functions—so that it is clear how their finances are managed.
As wealth managers leverage robo-advisors, the process should be part of a larger equation of responsible wealth management. This means that the robo-advisor was never meant to be a stand-alone system for management. Instead, advising decisions and actions should be regularly assessed by the wealth manager. An open line of communication and strong policies and procedures will provide the transparency and visibility that customers want and require.
The transparency and visibility question is one of customer experience. Robo-advisors should be used to improve the experience a wealth manager can offer; they are not a stand-alone service. Wealth managers must clarify which policies robo-advisors operate under and which services are offered by the company. Even further, wealth managers are responsible for putting their clients’ interests first—this will require assessing, evaluating, and adjusting based on the client’s interests.
The Ethics of Leveraging Robo-Advisors in Wealth Management
Robo-advisors are engineered to manage investment portfolios based on individuals’ long- and short-term goals, as well as their risk tolerance and investment horizons. This serves the end user effectively with personalized financial advice and direction. The systems are designed and programmed to take a high volume of data and distill it into actionable pieces of information. For the use of robo-advisors to be ethical and effective, however, wealth managers cannot simply hand off a client to a robo-advisor.
Robo-advisors are support systems for wealth managers in a rapidly changing financial landscape. They provide agility and efficiency that enable wealth managers to provide better customer experiences and adapt to the digitally driven expectations of younger consumers.
Ethical AI Usage in Practice
QadvisorGPT has real-time access to news and related data, making it an incredible asset for wealth managers who are looking to be agile and more in tune with current events. Putting AI into practice as a wealth manager will mean learning to leverage its assets—speed, number-crunching, data processing—alongside the expertise gleaned from years of experience. Human advisors must manage robo-advisors, continually monitoring the settings and configurations of portfolios.
As wealth managers implement robo-advisors within their businesses, these ethical issues should be addressed. A robo-advisor is a tool to bolster the relationship between wealth managers and their clients through efficiency gains, personalization, responsiveness, and a modern, tech-enabled approach. These are the values that should govern a wealth manager’s implementation of a robo-advisor. The client, their values, and interests should be top of mind and not sacrificed for efficiency gains or technological improvements.
AI-enabled wealth management services are in demand and increasingly valuable for today’s tech-driven consumers. Wealth managers must consider consumers’ desires for transparency, visibility, and clarity in managing their finances. These ethical considerations should take priority and be thoroughly addressed as the robo-advisor industry grows.
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