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Artificial Intelligence (AI) is causing the wealth management industry to rethink its foundational beliefs. From fintech startups to small independent firms to highly regulated broker-dealers – many are questioning longtime pillars like talent-retention strategies and business model basics in this new age of generative AI.
Vendor selection is no exception.
As the CTO of a leading fintech provider, our team is rewriting our rulebook for partnering in the age of AI. As we develop our own proprietary AI solutions for financial advisors, we’re integrating some non-proprietary features into our own offering. In a sense, we’re taking a build-buy-and-partner approach all at once.
What’s the best approach for a wealth management firm selecting an AI vendor? Decision points like product features, technical support and training, security and compliance, and of course price will always matter – but those are the table stakes. With AI, there are three critical risk factors to consider as you select vendors in this rapidly evolving space.
- Stability
Do you hire a large incumbent player in the space or partner with a lesser-known start-up? Behemoths like OpenAI’s GPT, Google’s Gemini, Meta’s Llama, and Anthropic’s Claude dominate the landscape of large-language models (LLMs) powering generative AI apps. But there are hundreds of smaller vendors and open-source options that offer unique value propositions. And we expect the options to multiply.
The large incumbents provide scale and predictability. You know what you’re getting with the Microsofts or Googles of the world, and you may have an existing relationship. Meanwhile, start-ups offer specialization, agility, and leading-edge innovation. Those that specifically tailor solutions for financial advisors are especially attractive – and potentially transformative for our industry. But most are early in their product development lifecycle – and many will crash and burn while others are bought up by the behemoths. While the size and life stage of your vendor is not the only factor, it’s certainly a key point to help you narrow the field.
The choice comes down to your strategic needs: The tried-and-true giants offer the benefits of scale and will help you maintain pace with the status quo in the enterprise wealth industry. Small start-ups can help you push the envelope with the potentially distinctive and exciting options they bring to the table.
- Stakes
Is the vendor supplying AI to drive the core of your business or as a supporting service to enhance an existing component?
In many ways this comes down to calibrating your risk. If you are selecting an AI partner for a core infrastructural capability to power, say, a CRM or advisor workflow system, that’s when the stakes are the highest – and you may decide to go with a tried-and-true vendor. As the old-time aphorism goes, no one gets fired for buying IBM (or Microsoft, or AWS). You’ll pay a premium, but you’ll get the product plus the block and tackling, like customer support and periodic upgrades. But if you’re shopping for a specific standout feature to enhance or sit on top of your main offering, you have far more latitude to take a chance. In this case, going with a smaller shop or an edge vendor can give you the specialized solution or innovative capability to complement your core offering.
- Relationship status
Is this a transaction or a partnership? If you are looking to buy a deeply integrated capability at market value, then track record and established market presence is paramount. On the other hand, if you are hiring a partner to co-develop or customize a capability, or can begin with something that’s open source, you’ll pay less and potentially land in a better place long-term with a newer market entrant. Collaboration can lead to custom solutions and ongoing innovation. Even better, partnering for development may also gain you invaluable domain knowledge and yield a unique solution that creates a competitive advantage for your firm.
Be curious and talk to as many vendors as you can. The market for AI expertise and products is fluid. Pricing models are in flux as incumbents and start-ups alike react to the dynamics of supply and demand for must-have innovation. At this early point in the AI development cycle, many of the best vendors are still in their infancy. If you choose carefully, you can grow with them. Like generative AI itself, the effort and data you put in now makes all the difference in the results of your search and ultimately, your end output.
Jed Maczuba is chief technology officer and a leading architect of Advisor360°’s market-leading, award-winning, flexible innovative platform. He oversees the company’s data management and operations, data platform engineering, its innovation lab, and he is responsible for accelerating research and development across the platform and spearheading development of future product capabilities.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
