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How AI will change the ways financial advisers manage your money

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How AI will change the ways financial advisers manage your money

Innovation in financial advice is sometimes met with this feeling of existential anxiety from financial advisers who worry that new technology will negatively affect their jobs — or at the very least, reduce their value. We’ve experienced this hype cycle repeatedly in financial advice, as fledgling technologies tend to create anxiety for advisers by automating or modifying legacy processes and services they historically managed.

While the concerns around job security are understandable, advisers can’t let that unease cloud the good that technology has brought to the advice industry — especially the ways it’s enhanced how advisers serve their clients. Technology has helped lower advisers’ costs and overhead by delivering efficiencies, including streamlining client onboarding and portfolio construction. And it has fundamentally improved their ability to deliver a more personalized experience for clients — cementing the durable value of coaching and guidance from human advisers. 

Fast forward to today, and the technology driving headlines is generative AI. This rapidly evolving technology has the promise and potential to change the ways we interact with nearly everything, including financial advice. As GenAI becomes prevalent in technology solutions across the industry, advisers would be well-served to consider its meaningful benefits and the accompanying risks, instead of viewing it as a fad or threat.  

Evaluating GenAI’s potential for advisers

There are many ways GenAI can provide value, but for advisers, most notable are the ways in which the technology can help streamline and augment administrative tasks. Here are three time-scaling benefits GenAI can provide advisers so they can prioritize more valuable tasks to help their clients reach their goals:

1. Content generation: GenAI can lend a hand with content generation for the routine communications that advisers often spend their time agonizing over — helping deliver personalized communications like standard client check-ins, meeting reminders and market updates.

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2. Knowledge management: Another of GenAI’s core use cases for advisers is in synthesizing and distilling a lot of information quickly. For example, GenAI can summarize comparisons between products, helping advisers make educated decisions more quickly for their clients. And rather than spending hours parsing through projections, lengthy annual reports and commentary to understand the latest market conditions or outlook, advisers can use GenAI to immediately summarize key takeaways and translate those insights into value for clients. GenAI can even help to distill prior client correspondence into more easily digestible notes and prompts as advisers prepare for upcoming meetings.   

3. Code generation: Just as GenAI can help develop and draft routine content, it can also generate web-page coding, helping advisers upload content on their websites for clients more quickly. And for larger advisory firms, GenAI-assisted code generation can help advisers and their software developers expedite custom technology solutions that assist with client onboarding and back-office tasks like data analysis, trading and operations. It can also support their ability to more seamlessly integrate internal systems for CRM, trading and portfolio management. 

Evolving technology has its risks

GenAI carries several risks if left unchecked, further reinforcing the importance of having a human adviser in the loop. While the time-scaling benefits of GenAI are attractive, advisers must have a framework in place to address risks, both to protect their practice and to safeguard private client information. 

One risk, for example, is jumping into a GenAI-focused partnership without conducting sufficient due diligence. We’ve witnessed explosive growth in GenAI technology, and new tools and platforms are popping up every day that may, at face value, seem like a good fit. It’s critical that advisers develop guidelines to vet potential partners and their technology, focusing on expertise, experience, client set and information-security measures. 

Another important risk advisers will need to guard against is any lack of awareness around the parameters of the GenAI platform they’re operating in. GenAI technology can be private, but some platforms are open to the public — like ChatGPT, for example — and advisers should consider oversight measures to ensure no confidential, proprietary or client information is shared. 

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Lastly, advisers should develop processes to spot risks related to hallucinations and biases. Hallucinations can occur when AI is prompted to provide a response to a question it hasn’t been trained to answer. Instead of not answering the question, AI can hallucinate and provide an incorrect response that sounds convincing. Additionally, GenAI tools can also suffer from racial and gender biases. For example, GenAI could recommend a lower investment-risk tolerance for women regardless of their actual appetite for risk. It is crucial that advisers understand the source data behind the AI they’re using, and have plans in place to check against unexpected hallucinations and biases that may perpetuate prejudices or stereotypes.  

With GenAI, advisers can more effectively manage their time — their most scarce and valuable asset — and devote more energy to creating personalized experiences and building deeper relationships with clients. Vanguard research shows that relationship-oriented services are a key differentiator in delivering value for clients, and that value increases as advisers establish emotional trust. Advisers who welcome technology and incorporate it judiciously have the potential to deliver better results for clients. 

Lauren Wilkinson is a principal at Vanguard and chief information officer for the firm’s Financial Advisor Services (FAS) division.

More: Saving too little? Spending too much? How to know if your money worries are rational (or not).

Also read: A rude awakening: Lack of financial literacy hurts the young. What about older people?

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University of Phoenix and Goalsetter Launch Financial Wellness Webinar Series

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University of Phoenix and Goalsetter Launch Financial Wellness Webinar Series

Virtual, free series features Goalsetter’s award-winning curriculum along with guest speakers to support financial wellness

PHOENIX, November 04, 2024–(BUSINESS WIRE)–University of Phoenix is pleased to announce a new webinar series with Goalsetter, an award-winning financial education platform dedicated to helping individuals and families achieve financial wellness through engaging and practical resources. The ten-part series will launch with a discussion on “Managing Credit Card Debt and Fostering Good Credit Habits,” on Tuesday, November 19, at 12 p.m. MST. Featuring Tanya Van Court, Founder and CEO of Goalsetter, Kevin Soehner, Senior VP of Operations for iGrad®, and moderated by Chris Conway, Director of Financial Literacy at University of Phoenix, the discussion will focus on building good credit habits, understanding interest rates, and how credit can impact personal finance decisions. Throughout the series, participants will gain valuable insights and practical strategies to manage their finances and plan for a secure financial future, as well as have the opportunity to engage in a Q&A session during each webinar.

“At University of Phoenix, we are committed to equipping our students with the knowledge and tools necessary for financial success,” shares Director of Financial Literacy at the University, Chris Conway. “Our collaboration with Goalsetter aligns with our mission to empower students not only in their academic and career pursuits but also in their financial lives by helping them save time and money. This webinar series is designed to provide practical strategies and insights that can help learners make informed financial decisions.”

Each month during the series, University of Phoenix and Goalsetter will offer webinars focused on key strategies for financial wellness:

  • November: Managing Credit Card Debt and Fostering Good Credit Habits

  • December: Paying for School and Scholarships

  • January: The Art and Science of Effective Budgeting

  • February: Stop Overspending: 5 Tips

  • March: Yes! You Can Save Money: Little Actions that Add Up

  • April: Emergency Funds are Critical; How to Create Them, Even If You Think You Canʼt

  • May: Why Credit Scores are Important and How to Improve Them

  • June: How to Plan for Your Eventual Retirement

  • July: Investing in Your Families’ Future

  • August: How to Set Your Kids Up for Future Financial Success

“Our mission is to empower every individual with the financial knowledge they need to secure a strong financial future,” says Van Court. “By working with the University of Phoenix, we are bringing our award-winning financial education tools to a larger audience, helping individuals and families gain the practical skills to make informed financial choices. Together, we aim to create a pathway toward financial freedom that’s accessible, engaging, and transformative.”

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Why banks are (probably) rooting for Donald Trump

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Why banks are (probably) rooting for Donald Trump

US banks have a lot riding on the outcome of Election Day even if they’re not 100% sure how either candidate might treat their industry.

The “knee-jerk reaction,” according to KBW analyst Chris McGratty, is that a Donald Trump victory will mean a return to looser regulation of banks and more leniency in approving the sort of corporate mergers that produce big profits for Wall Street giants.

A Kamala Harris win, on the other hand, may mean that a more aggressive period of overseeing the nation’s largest financial institutions under President Joe Biden will continue.

Screens show the presidential debate between former President Donald Trump and Vice President Kamala Harris on Sept. 10. REUTERS/Adam Gray · REUTERS / Reuters

“In my investor conversations, it definitely feels like people are pricing in Trump,” McGratty told Yahoo Finance. “So initially, if the election goes to Harris I would think banks would sell off,” he added.

The country’s largest lenders have had a great year thanks to the economy’s resilience during a period of elevated interest rates and a rebound in their investment banking and trading operations. The hope is next year could also turn out well, if lending and Wall Street dealmaking churn higher while interest rates fall.

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An index tracking 24 of the largest domestically chartered US commercial banks (^BKX) is up 27% so far this year, outperforming the broader financial sector and major stock indexes.

Those other indexes for the financial sector (XLF), Nasdaq Composite (^IXIC), S&P 500 (^GSPC) are up 24%, 21% and 20%, respectively.

The consensus among industry observers is that a Trump White House might be more favorable for a run-up in financial stocks. After all, bank stocks rose 20% following the three months after Trump was elected in 2016.

But the challenge for bank executives as they assess the impact of a new president is that neither Trump or Harris have said much about how they want Washington to oversee the biggest banks in the US.

So instead their track records have largely spoken for them.

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The Trump administration of last decade delivered a big corporate tax cut, and it also rolled back some big bank rules that were imposed in the aftermath of the 2008 financial crisis.

Harris, on the other hand, has touted her clash with big banks when she was California’s attorney general as an example of her willingness to take on powerful interests.

One big unknown is what either administration would do with a new set of controversial capital rules proposed by top bank regulators that would require lenders to set aside greater buffers for future losses.

The requirements are based on an international set of capital requirements known as Basel III imposed in the decade following the 2008 financial crisis.

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Climate finance billions at stake at COP29

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Climate finance billions at stake at COP29

Rich nations will be under pressure at this month’s UN COP29 conference to substantially increase the amount of money they give to poorer countries for climate action.

But there is deep disagreement over how much is needed, who should pay and what should be covered, ensuring that “climate finance” will top the agenda at COP29 in Baku.

– What is climate finance? –

It is the buzzword in this year’s negotiations, which run from November 11 to 22, but there is not one agreed definition of climate finance.

In general terms, it is money spent in a manner “consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”, as per phrasing used in the Paris Agreement.

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That includes government or private money for clean energy like solar and wind, technology like electric vehicles, or adaptation measures like dykes to hold back rising seas.

But could a subsidy for a new water-efficient hotel, for example, be counted? It is not something the COP summits have addressed directly.

At the annual UN negotiations, climate finance has come to refer to the difficulties the developing world faces getting the money it needs to prepare for global warming.

– Who pays? –

Under a 1992 UN accord, a handful of rich countries most responsible for global warming were obligated to provide finance.

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In 2009, the United States, the European Union, Japan, Britain, Canada, Switzerland, Norway, Iceland, New Zealand and Australia agreed to pay $100 billion per year by 2020.

They only achieved this for the first time in 2022. The delay eroded trust and fuelled accusations that rich countries were shirking their responsibility.

At COP29, nearly 200 nations are expected to agree on a new finance goal beyond 2025.

India has called for $1 trillion a year and some other proposals go higher, but countries on the hook want other major economies to chip in.

They argue times have changed and the big industrialised nations of the early 1990s represent just 30 percent of historic greenhouse gas emissions today.

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In particular, there is a push for China — the world’s largest polluter today — and the oil-rich Gulf countries to pay. They do not accept this proposal.

– What’s being negotiated? –

Experts commissioned by the UN estimate that developing countries, excluding China, will need $2.4 trillion per year by 2030.

But the line between climate finance, foreign aid and private capital is often blurred and campaigners are pushing for clearer terms that specify where money comes from, and in what form.

In an October letter to governments, dozens of activist, environment and scientific groups called on rich nations to pay developing countries $1 trillion a year in three clear categories.

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Some $300 billion would be government money for reducing planet-heating emissions, $300 billion for adaptation measures and $400 billion for disaster relief known as “loss and damage” funds.

The signatories said all the money should be grants, seeking to redress the provision of loans as climate finance that poorer countries say compounds their debt woes.

Developed countries do not want money for “loss and damage” included under any new climate finance pact reached at COP29.

– Where will they find the money? –

Today, most climate finance aid goes through development banks or funds co-managed with the countries concerned, such as the Green Climate Fund and the Global Environment Facility.

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Campaigners are very critical of the $100 billion pledge because two-thirds of the money was given as loans, not grants.

Even revised upwards, it is likely any new pledge from governments will fall well short of what is needed.

But this commitment is viewed as highly symbolic nonetheless, and crucial to unlocking other sources of money, namely private capital.

Financial diplomacy also plays out at the World Bank, the International Monetary Fund and the G20, where this year’s host Brazil wants to craft a global tax on billionaires.

The idea of new global taxes, for example on aviation or maritime transport, is also supported by France, Kenya and Barbados, with the backing of UN chief Antonio Guterres.

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Redirecting fossil fuel subsidies towards clean energy or wiping the debt of poor countries in exchange for climate investments are also among the options.

COP29 host Azerbaijan, meanwhile, has asked fossil fuel producers to contribute to a new fund that would channel money to developing countries.

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