Three Critical Risk Factors in the Age of AI

Jed MaczubaAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

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.

  1. 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.