• As AI disrupts the financial industry, the current stock selloff is testing assumptions about the industry’s future and showing the need for human skills.
  • Robo-advisors increasingly important to younger investors and big banks are adapting to the demand.
  • While lower-wage workers are often the victims of tech revolutions, a recent Brookings Institute study concludes AI may have taken its biggest toll among high-paying jobs.

When financial markets plummeted amid fears over the spread of COVID-19, Bleakley Financial Group’s Shaun Feldeisen jumped on the phone with his clients.

While Bleakley relies on digital financial planning tools to gather and analyze data for its more than $6 billion in client investments, Feldeisen knew that his clients wanted more than crunched numbers. They wanted to hear his deep, calm and reassuring voice.

“During times of stress and fear, people can make some very bad decisions that go completely against what their long-term goals are,” Feldeisen told Karma. “It’s really about being able to communicate the right message at the right time, to help people realign their actions and do those right things confidently.”

With digital innovation and artificial intelligence disrupting the financial industry amid the rise of robo-advisors including Betterment and Wealthfront, Feldeisen’s experience illustrates a more complicated understanding of the market, where humans will succeed by remaining, well, human.

Financial advisors, marketing specialists, computer programmers are among the most susceptible to AI’s effect on the workplace, according to a Brookings Institute report that attempted to peer into the future by analyzing new technology patents. But while AI innovations may take some of the baseline work, human-side skills will play an increasingly crucial role across all industries, says one of the report’s authors.

“Disruption is coming for everyone, but that doesn’t mean that it necessarily is going to eliminate all jobs. It does mean that the content of jobs will change,” said Robert Maxim, a research associate in Brookings’ Metropolitan Policy Program. “Crafting and honing those soft skills is hugely important. It’s the type of thing that will help workers manage transition.”

The researchers didn’t look at whether AI would lead to job losses. The report did refer to other studies that indicated that AI was likely to eliminate some positions, but that those losses could be offset by new jobs.

Artificial intelligence, which involves programming computers to do “intelligent” tasks, whether it be planning, learning, problem-solving or prediction, is already at the forefront of the financial industry as firms ranging from Morgan Stanley to small fintech startups are experimenting with different tools to help clients manage their money and plan for retirement.

For instance, Betterment and Wealthfront, two of the largest robo-advisors, provide financial advice and portfolio management online or via an app, applying algorithms to determine where to invest. Global assets under management by robo-advisors, which reached more than $1.4 trillion this year, are expected to grow at an annual rate of 21% through 2023, according to a report from Statista.

Nine out of 10 Wealthfront clients are under 40 and don’t want to talk to advisors, said Kate Wauck, the company’s vice president of communications. “They literally tell us ‘I am paying you not to talk to me.’”

“The last thing they want is to pick up the phone and call an advisor, even during times of volatility,” Wauck said in an email. “They want everything online and through an app, so that is what we provide them.”

Wauck said new account sign-ups went “through the roof” during the market volatility of March 9, compared with prior days. It could be these new clients had been investing on their own and decided they needed help, or they could have been waiting on the sidelines for a chance to get in on a dip, she said.

Dip Buying

Betterment said its clients’ most common reaction to the drop in the market has been “dip buying,” with about $17 million flowing in. Some clients did call asking about tax-loss harvesting and how to do more of it, Arielle Sobol, Betterment’s senior communications manager, said in an email.

Of course, no technology can be completely foolproof. Digital investment platform Robinhood was inaccessible to millions of customers on March 9 after days of technical problems that started on March 2 on one of the busiest trading days of the year. Robinhood founders Baiju Bhatt and Vlad Tenev in a statement blamed the outage on trading volume loads and promised “to work to improve the resilience of our infrastructure.”

Bleakley’s Feldeisen says while new technologies have made investment and wealth management more accessible, they are not likely to completely replace human interaction anytime soon. And although there is plenty of online investment advice, clients often want a second opinion, especially at a time of stress.

“I think this technology wave that’s coming out is fantastic at getting us better tools to be more accurate with that conversation, to have more impact, so people can take better action, more quickly,” he said.

Last year, all but four of the 50 top robo-advisor all-equity “value” portfolios underperformed the S&P 500, which was up 30%, according to a robo-advisory ranking by Nummo, a personal financial management platform. The average performance was 22% with the bottom three portfolios returning 8% or less.

While previous studies on automation had shown that less-educated, lower-wage workers may be most exposed to displacement, Brookings found that better-paid professionals and bigger, high-tech metro areas are most vulnerable to AI, with both negative and positive potential impacts. The researchers looked for overlap between text from patents filed for innovative technologies and job descriptions from the U.S. Department of Labor’s database. 

The onset of AI in business, finance and tech industries will affect high-paying jobs that often skew to white and Asian male workers with bachelor’s degrees, Brookings said. Other vulnerable jobs include graphic designers, sales managers and management analysts. Meanwhile, “women’s heavy involvement in “interpersonal” education, health care support, and personal care services appears to shelter them.”

Tech innovation, which brings both benefits and stress to the workforce, creates impact investing opportunities in education, soft skills training and other areas that ensure workers are equipped to handle the potential change, says Brookings’ Maxim.

“In my observation, that is somewhat of a black hole when it comes to investing right now,” he said.