Crypto for Advisors: AI - Friend or Foe to the Advisor?

Jordi Visser from Weiss Multi-Strategy Advisers discusses the impact AI could have on investing and what to watch out for.

AccessTimeIconSep 28, 2023 at 3:45 p.m. UTC

New technology often scares people. It can change the status quo and disrupt people's comfort zones, and history has shown that untested technology can have unintended consequences. As Artificial Intelligence has arrived on the scene, we've seen an influx of capital into AI startups and new applications. In my circles, our friends and family are playing with tools like ChatGPT to get a sense of the opportunity and possibilities ahead. Already, we are seeing legal issues and concerns over the application of this new technology.

As with anything new, AI can improve parts of your business or disrupt workflow, making client interactions more challenging. Today, Jordi Visser from Weiss Multi-Strategy Advisers discusses where and how your clients will first encounter AI technology. Studies estimate that more than 300 million jobs worldwide will be affected by AI technology, and the most at-risk are white-collar workers. Interestingly, repeated Internet searches list roles that AI will automate and could impact, yet the role of 'advisor' or 'financial planner' is not targeted to be obsoleted by emerging technology.

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  • While investor demographics will change and investors will gain access to more technology tools like robo-advisors and AI-traded portfolios, the trusted relationship between advisors, their networks and clients is forecasted to remain intact. Are you ready for this disruption? Will AI be your friend or your foe?


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    The Importance of Authenticity for Trust in an AI-Driven World

    Trust is the bedrock of all relationships, as financial advisors know all too well. It is said that trust takes years to build, seconds to destroy and forever to repair. When trust breaks down, it wreaks havoc on how we interact and function, a troubling thought for investors facing no shortage of headwinds. A key ingredient for building trust is authenticity – the ability to be genuine, transparent and act with integrity, which is critical for advisors as they work to strengthen relationships with clients, build new ones and grow practices.

    However, the rise of advanced AI threatens to undermine advisors’ authenticity in alarming ways. As machine learning algorithms become better at emulating human conversation, creativity and emotions, the line between real and artificial personas blurs and the end-client experience is suddenly called into question. AI chatbots, virtual influencers and deepfake videos make it hard to discern what is human-generated from machine-fabricated.

    When interacting online, we rely on signals like profile photos, voices, brand familiarity and language to judge if someone is a real person and acting in good faith. But AI can skillfully imitate these, causing all sorts of risks for clients. The result is anxiety about living in a post-truth world inhabited by AI imposters.

    With the launch of ChatGPT and the rise of generative AI, trust and authenticity are breaking down and this has been a wakeup call for the wealth management industry. It will drive advisors and investors alike to look to new innovations to not only protect, rebuild and repair trust, but to find out the right ways to harness AI’s remarkable capabilities in a positive manner.

    Consider this: Nearly one in three investors would use artificial intelligence as their financial advisor, according to a recent survey by the Certified Financial Planner Board of Standards, the body that governs the CFP designation for financial advisors. This poses an obvious threat to wealth managers, as well as raises significant concerns about the quality or appropriateness level of the financial advice that AI may recommend.

    Not all hope is lost. The same survey shows that younger investors – a massive market for financial advisors – are more skeptical of using AI for financial advice than older ones. There’s no shortage of reports, including ones by Morningstar and Salesforce, showing how wealth advisors can use AI to grow their practices and become more efficient.

    In 2008, while the world was no longer trusting the banking system just weeks after Lehman’s collapse, the Bitcoin white paper was released by Satoshi Nakamoto. The paper emphasized trust as the fundamental pillar on which the Bitcoin protocol is built and how trust is essential for any currency or financial system to function properly.

    Restoring trust in the AI era will require turning to ideas put forth by Satoshi Nakamoto and blockchain technology. Blockchain provides decentralized, transparent records of data and transactions. Through blockchain verification, creators can prove authenticity and ownership of content, and investors can have faith that their financial portfolios are safe and secure.

    Web3, dubbed the internet's next phase, emphasizes decentralized networks, establishing a direct, transparent connection between creators and consumers – a marked departure from prior battles against monopolistic forces. Though this new paradigm goes far beyond the financial advisor landscape (look no further than the Hollywood writers and actors strike, financial services will nonetheless need to adapt. Change is coming and advisors’ No. 1 weapon – the ability to earn and keep clients’ trust – will come under pressure.

    As AI systems become more advanced at emulating human behaviors and media, they erode authenticity, a key pillar of trust and the bedrock of all successful financial advisor practices. When chatbots, deepfakes, and AI-written text seamlessly impersonate real people, it fosters an atmosphere of misinformation and deception, hardly a successful recipe for a happy client. Without transparency around AI, people lose faith in what is genuine versus artificially manufactured online; to maintain trust in an AI-driven world, advisors need new safeguards and a vigilant mindset to ensure that the authenticity and integrity that’s been so instrumental to their success stays safe.

    Ask an Advisor: How Blockchain is Transforming Traditional Finance

    Do you see blockchain’s influence on TradFi right now?

    While we think blockchain can transform traditional markets and finance, we don’t currently see any material impact. For now, the familiarity with traditional systems has kept the status quo in effect. There is a lot of room for increases in efficiency using blockchain but it will take time.

    In what ways can blockchain increase efficiency for traditional finance?

    We think that cost reduction is going to be one of the main advantages of blockchain. By disintermediating unnecessary steps and participants transacting with blockchain becomes more efficient and cheaper. For example, current Bitcoin transaction fees are around $1 per transaction. The cost to send a wire is generally around $25-$50; and while other forms of moving assets (like ACH) can be cheaper, the facilitator of those transactions still has the right to charge more. Not only are blockchain transaction fees more transparent and cheaper, they also allow for quicker movement of assets. The networks are up 24/7 and transactions are generally consummated in under 10 minutes. Moving small amounts of money might be easy with Venmo, CashApp, Paypal, and the like but it isn’t faster than utilizing a blockchain, and once you want to send even larger dollar amounts, the benefits of a 24/7 network become evident.

    Is there a timeframe for blockchain to integrate itself into traditional finance?

    It’ll take time obviously. We think that the interest in digital currencies will bring attention to the benefits of blockchain, even if it is through centralized platforms. But as interest increases people will see the benefit of blockchain and begin to apply it to other aspects of TradFi. We are just seeing the start through tokenized U.S. Treasuries. With over $1 billion in market cap it can be easy to swap into these yield products from conventional cryptocurrencies.

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    Edited by Bradley Keoun.


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    Sarah Morton

    Sarah Morton is Chief Strategy Officer and Co-founder of MeetAmi Innovations Inc.

    Jordi Visser

    Jordi Visser is President and Chief Investment Officer of Weiss Multi-Strategy Advisers