What Alexa really means for wealth management

What Alexa really means for wealth management

Advisors in the past year have likely caught fintech demos at wealth management conferences demonstrating how they and their clients can introduce voice assistants like Amazon's Alexa into the planning process.

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Big firms have followed suit. Envestnet|Yodlee and eMoney Advisor are now promoting new voice recognition technology as “Alexa-empowered” that can help advisors retrieve information about client accounts or assist them with navigating CRM portals. TD Ameritrade recently announced an overhauled Amazon Alexa Skill, where retail clients can access accounts and place trades by speaking to an enabled device. But while voice-assisted technology promises to one day make keyboards a thing of the past, hurdles to widespread acceptance of voice assistants in the financial services industry presently remain — including concerns about keeping sensitive client data secure and determining if the technology is really ready to hit the mainstream business marketplace. “Google and Amazon are thinking about smart voice devices from a consumer standpoint,” says Frank Coates, executive managing director of Envestnet|Yodlee. “They’re not thinking about it from a business standpoint.” Smart speakers, like Alexa and Google Home, have made inroads into the consumer market by allowing users to stream music or check the weather with the sound of their voice. The overall smart speaker market topped 16.8 million units sold in the second quarter of 2018, according to data from Canalys. Google Home commanded the largest smart speaker share globally with 32% of shipments compared to 25% for Amazon Echo in the second quarter of 2018. Worldwide sales volume ballooned 187% from the year ago period. While the technology itself has not caught the attention of regulators, large financial institutions remain reticent to embrace Alexa-based technologies, mostly because of internal compliance rules, Coates says. “It’s going to take a while for leaders in the financial world to dip a toe in the water.”

Firms are right to be wary, experts say. FINRA has robust rules in place to safeguard customer records and to ensure the safe disposal of consumer report information. For example, advisors will have to be cognizant of when and where they use voice-recognition technology and to make sure the logged-in accounts remain secure — even on public devices. “You wouldn’t want someone riding a busy train talking about sensitive client information,” Coates says, citing similarities to an advisor using a cell phone. Consumers too aren't entirely ready to perform financial transactions through smart speakers, either. Voice recognition errors remain plenty enough, a survey found, that out of 1,000 millennials, only 24% said they would use a voice assistant to check their bank account versus manually checking their account. Cybersecurity was cited as a top compliance concern among investment advisors in a 2018 Investment Adviser Association survey. Nearly two-thirds of the 450 respondents increased the type, scope or frequency of compliance testing to bolster efforts to keep client information secure. While advisors will have to be aware of security issues, Alexa technology may have one compliance advantage over traditional cell phone usage: Everything is recorded. A cellphone might have a record that a call was made at a certain time, while voice enabled devices keep a record of the actual conversation, he says. New regulation around data privacy are not only needed, but mandatory, says Wes Stillman, CEO of the RIA cybersecurity provider RightSize Solutions. While guidelines may been seen as costly and restrictive, advisors must be in a defensible position if they find themselves in court, he says. “Our personal data can reveal more about us to others than even we may know about ourselves,” Stillman says. “Used properly in the right hands, this information can potentially propel business forward faster than ever before.” The Yodlee offering uses machine learning and natural language processing to get answers in real-time, according to the firm, and is available for desktop, mobile and on Amazon Alexa-enabled devices. For example, an advisor can be pull into a client’s driveway before a meeting and ask Alexa for a quick refresher, Coates says. “Who is this family and how can I help?” Envestnet|Yodlee partners with roughly 1,100 financial institutions, including 13 of the top 20 U.S. banks, according to the firm. Some 90,000 financial advisors work on the platform, although only a few hundred have utilized the voice-recognition technology to date, according to Coates. While Alexa-enabled offerings may prove an effective marketing tool for many firms, what does the everyday performance feel like for advisors? Admittedly, nascent. “The short answer is that they’re not going to be perfect,” says Denise Valentine, senior analyst of wealth management at the Aite Group. Most companies are just rolling out the best gambit they currently have and will continually “go back and fix it” once enough errors are reported. That’s because rolling out a product quickly — albeit prematurely — may be more advantageous than waiting for a final product, she adds. “Everyone wants to be first to market,” Valentine says. “The early adopters have the most stickiness.” “It may not be Alexa,” Valentine says, about gaining mass adoption. “It could be someone else who upsets that with a phenomenally improved version, but it’s going to happen.”

For Envestnet, which is looking to be a full-service outsourcing and technology provider, offering the next big thing helps them be perceived as innovators, she says, and helps bring on new advisor clients. “Firms want to stay ahead of the curve,” Valentine says. While Watson and Alexa look polished in industry demos, most voice-recognition services are still a bit clunky, says Chad Porche, vice president of design at eMoney. “Speed is definitely a factor,” Porche says. “You need to wait for it to think, basically parsing what you say and then mapping it,” he says, adding that next-generation technology will advance quickly. Another potential pitfall to mass adoption is a lack of authenticity. Although the technology mimics human interaction, clients quickly infer that the conversation is scripted, Porche says. “We saw this with robo advisors, which we all thought were going to replace the financial advisor. But at a point in the experience, you start to understand you’re dealing with an algorithm — or a calculator — and that can be a bit of a turn off.” The grail for wealth managers could be a tool that behaves more like a dutiful personal assistant than a conversation partner. Clients at eMoney have expressed interest in a system that can pick up on important pieces of information during a client visit — like level of income or investable assets — and automatically input that data into a financial plan, Porche says. The CRM of the future would allow advisors to be more fully engaged in the conversation instead of having to take traditional notes on a desktop or legal pad, he says. While eMoney is looking toward similar improvements, the functionality is still on the wish lists, he says. “We’ve had successful proofs of concepts,” Porche says, adding that significant challenges remain. “We’re waiting to see where some of the dragons are hiding.” The most significant problem might not be creating the technology, but changing public opinion. There is growing awareness about the mass collection of consumer data, which together could generate a profile that’s more revealing than a client would typically authorize, according to a new study on AI in financial services industry by the Aite Group. “A big problem is acceptance,” Valentine says. “Some feel it’s a violation of privacy and have suspicion about being recorded. The scenarios we see in the movies — that’s what feeds the fear.” While significant hurdles remain, it’s hard to imagine a wealth management future without voice recognition technologies, experts say. Alexa could hit mass adoption in as little as three years, according to an estimate by Coates. Similar to the pace of widespread cell phone and social networking adoption — which took about three to five years to become commonplace in advisory practices — voice recognition technology could follow a similar timeline. In fact, only 32% of firms reported prohibiting the use of social media in 2018, according to the Investment Adviser Associationsurvey. “Alexa is just a baby,” Valentine says. “But, she’s going to grow up fast.”