Why advisors and advisory firms should build AI trading tools now

As generative AI upends industries, Capco managing principal sees opportunity to reach the next generation and improve mass market margins

Why advisors and advisory firms should build AI trading tools now

Jasmina Hazuria wants to see AI used in the investment space. The managing principal at Capco Canada works with financial services companies and institutions to manage and advance their technological change. The rise of generative AI has already upended industries from healthcare to industrial logistics, and Hazuria sees financial services firms and, notably, robo-advisors move more into the AI space.

Those explorations go beyond the KYC and KYP automations that are already present in the industry. What Hazuria envisions is an AI-driven trading tool. As younger generations begin to save and invest, she sees generative AI tools as a key to giving these younger investors a more tailored self-directed experience, one where their risk parameters, goals, and values are integrated into recommended stock purchases or ETF allocations. Hazuria notes that we haven’t seen these tools implemented yet, but the very prospect of their implementation, and the rapid pace of change we have already seen with AI, should motivate advisors to explore AI solutions of their own.

“With AI I could get the uniqueness and the customized experience that I get with an advisor inside my self-directed experience,” Hazuria says. “I would want a solution hwere I could put in my parameters, the sorts of companies I want to invest in, whether I am interested in ESG, how much risk I am willing to take, and the recommendations and notifications I get are similar to what I would usually get through an advisor.”

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While it might be easy for advisors to concede this ground to robo-advice tools like Wealthsimple or Questrade, Hazuria thinks there’s an opportunity to invest in AI solutions that bring the next generation into advisory practices. She notes that Gen Z has already shown a preference towards saving. The generation that came of age during the COVID-19 pandemic and entered the workforce during a cost of living crisis is aware of how important saving is for long-term financial health. Equipping them with passive saving and investing tools can help an advisor win the trust of a Gen Z client, who will need their more tailored wealth management services later in life.

While Gen Z clients may not have the account sizes of their Boomer or even Millennial counterparts yet, Hazuria thinks advisors need to be ready for their accounts to grow. She highlights the ongoing intergenerational wealth transfer as one key factor to remain aware of. She notes, as well, that the implementation of AI tools could drive improved margins for these more mass-market clients.

Smaller account clients are often seen as less desirable because the work they require is not worth the smaller fees that come from a smaller account. With AI taking care of the core trading work, however, those clients can be better served without as much of a drain on advisors’ time.

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While customer-facing AI trading tools can also help advisors free up capacity, Hazuria notes that product companies and advisory firms are still at the very exploratory stage. So, too, are robo-advisors which have shown so much leadership on the tech side of the business in recent years. As advisors envision the applications and opportunities of AI tools for their practices, she believes they need to advocate to their firms for the solutions they want now.

“[Advisors] need to express the need. There are product companies out there that are probably working on this already, but by expressing the importance of these solutions advisors can accelerate this,” Hazuria says. “It’s just a matter of communication and awareness. As we say we need a solution, the product companies can respond and deliver it.”