It seems the sky is the limit for AI in wealth management. Industry expectations for this new technology couldn’t be higher – if only advisors and investors knew what to expect!
To learn more about AI and how it will change the financial advisory industry, InvestmentNews met David Bailin, CEO and Founder of CIO Group. The CIO Group is an independent AI-powered wealth manager that helps identify opportunities and risks that may be invisible to other advisors.
InvestmentNews: Where do you see AI being most effectively applied to wealth management today, and how do you envision it shaping the industry over the next 3-5 years?
Bailin: To understand the impact AI will have on wealth management, one must understand what AI can do today and how its capabilities will grow exponentially. Today, AI is a talking machine. Users ask him a complex question and he provides an in-depth answer. Tomorrow, AI will be your colleague. Literally. So for wealth managers, AI agents will be able to read and summarize news, monitor companies and send alerts, conduct large-scale market research, and more. In 2026, AI agents will work in 20-30 minute sprints.
It may seem far-fetched, but in just a few years, “long-term AI” will soon enable CIOs to have AI agents working all day on CIO-related tasks. Long-lived AI will be able to perform basic administrative tasks in wealth management: compliance monitoring, portfolio monitoring, model and risk management, etc. And the AI agents will also be interactive. This is where we are going.
What AI can’t do is anticipate, understand events that have never happened before, and make firm judgments about them. This is why it is essential to understand the limitations of AI when building new wealth management business models.
InvestmentNews: Do you see AI as a tool that will significantly reduce costs or save advisors time, and if so, in what specific areas?
Bailin: There is no doubt that AI will save advisors time and money. Many advisor tasks are administrative and repetitive. For example, AI will lead financial planningproposal generation, customer communications and initial prospecting. All this can be automated without loss of quality.
However, the adoption of AI agents will require advisors to spend time learning how to use the technology. AI agents will need to learn the tasks and learn the methods that an advisor wants to use. For “old school” FAs, this will be much more of a change than using a new software package. That’s why it’s up to RIA and brokerage management teams to steer FAs toward AI experiences that will make them understand how beneficial AI agents can be for them. I expect some advisors to become much more efficient and effective, while others will see their business stagnate.
InvestmentNews: What inspired the creation of the CIO group and why was AI chosen as a priority?
Bailin: CIO Group was created to fix what doesn’t work in traditional wealth management, where many investors unknowingly suffer from poor performance, generic portfolios and high, opaque fees. Too often, advisors charge for customization, but place clients into standard templates. And when one person has accounts at multiple companies, no one manages the combined risks. CIO Group is free from the legacy systems and limitations of big banks, so we can align our services solely to serve the best interests of our clients.
Investment News: What are the biggest obstacles you face when implementing AI in wealth management, and how are you overcoming them?
Bailin: Working with AI is both complex and extremely useful. There are few off-the-shelf AI solutions for wealth management in general, and none that specialize in portfolio solutions for investment managers. We assembled and sequenced different AI tools to achieve our goals. And we learned that building an AI-driven business is iterative. You have to build, test and implement, then refine – and do the same thing repeatedly. Another obstacle concerns what we call “moments of judgment.” Some processes require human intervention. For example, we might want to try two or three portfolio designs and test them before choosing one to implement. We integrate these human reviews into our processes.
InvestmentNews: Are there areas in your opinion where the promise of AI in the wealth management industry is currently overstated?
Bailin: The most troubling use of AI is in the area of models and algorithms for managing money. There is no ‘morning star‘notes for the portfolio management models currently in use. There are currently over 10,000 models in use. And when clients ask advisors what’s really going on with clients’ asset management model, they often have difficulty explaining the basis of the model or how it responds to geopolitical or macroeconomic changes.
AI does not replace human judgment and is a poor predictor of the future. It is trained on past events and data and can sometimes detect valuable patterns. But what he cannot do is make good judgments based on genuinely new circumstances. This week, the United States intervened in Venezuela, threatened military action in Iran, held negotiations over the future of Greenland and the administration proposed capping credit card rates. This increases the fragility of markets. This is why we need minds, not models. AI does not replace the hard work of decision-making.
This article is part of our Monthly Spotlight series, focusing in January on AI in Wealth. Full coverage can be found here.