In our recent interview, Pamela Cytron, President of The Founders Arena WealthTech Accelerator, shared her insights on the varied interpretations of AI among startups within the wealth tech industry. She emphasized that AI means different things to companies, depending on their goals and customer needs.
“One of the first things I’m going to say is that I do not think every startup in the world has to decide how to add AI to their name. Our role is to dig into technology and decide what AI means. AI for application purposes has to do with the customer, their attributes, and goals because that’s who we’re building tech for,” says Cytron.
Her viewpoint underscores the diverse approaches startups take towards AI, reflecting the tailored and unique ways they each individually leverage the technology to meet a range of specific objectives within the industry.
AI and client attributes
Cytron believes that the wealth tech industry should now be entirely focused on implementing AI across their systems. The current Founders Arena cohort applications and the startups already selected reveal that early-stage companies are laser-focused on practical AI use cases and Know Your Customer (KYC) capabilities. These new AI solutions are designed to capture and analyze client data and attributes. A wealth manager’s interaction with a client should be captured and used for future decision-making, including assessing client behaviors.
She adds, “Advisors may ask their client a question, but are they capturing it? Do they know that their client rides bikes? Or do they know their client does unhealthy things in their lifestyle? All these alternative attributes are related to the client’s goals and aspirations. That’s where we see a lot of AI come in around that personalization experience.”
Cytron says RIAs are incredibly well-positioned to act on alternative data using AI applications. Alternative data pertains to the wealth management industry and refers to non-traditional data sources that provide additional insights into clients’ behaviors, preferences, and financial situations. Unlike conventional data, which typically includes financial statements, credit scores, and transaction histories, alternative data encompasses a broader range of information that may not be directly financial but can still be valuable in assessing client needs and investment opportunities.
Using advisors’ alternative data on their clients, some wealth tech startups are creating AI and APIs to connect from one system to another, moving and pulling data. But what’s important is what happens in that transfer—AI and automation create personalization, holistic transparency, communication, and performance results of clients’ financial goals. Of course, there’s much more AI can do inside wealth tech, too.
“A company like First Rate, which engages with our cohort, knows the speed at which these tools are being created for holistic advice or performance. Harnessing these tools is crucial for trust and reliability. They come as a partner through us directly to those startups capable of capturing and using that information for them,” adds Cytron.
A new ‘AI spin’ on performance measurement
In our industry, performance is frequently judged solely by the direction a portfolio moves—whether it rises or falls. By combining AI with portfolio management technology, wealth managers can go deeper than the numbers.
“Using AI, clients can find out how they’re performing against their wellness goals and aspirations, which would be an aggregated model of personal wellness data,” she adds.
One of The Founder’s Arena cohort companies is pioneering AI for verifying advisor reviews. Since Google reviews are now the number one source of referrals for advisors, the AI reads the sentiments in the reviews and determines whether they are true or false.
Making a stale industry fresh again
Cytron says that the challenge for AI startups building a platform from scratch is being able to outperform and grow fast while not hampered by legacy systems. The wealth sector, from community banks to big banks, BDs, and RIAs, has access to data but must enhance its technology to capture it more effectively.
The new generation of advisors will push to use AI platforms to assist in capturing client data and then acting on it, making the client experience more holistic, transparent, and meaningful.
“We must enhance this industry with new talent and sophisticated, data-centric analysts because they will process and use data differently than in the past.
Whether in wealth management or other industries, the vertical focus of technology, AI, and collaboration will be more critical. It cannot be a horizontal sport anymore,” she adds.
