Vinay Nair: Using AI to Personalize Wealth Management at Scale

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We've all been warned that anytime you hear someone say, this time is different, you better put your guard up because you're about to be sold something. Well, in the case of AI, this time may actually be different. Hi everyone, I'm business coach Steve Sandusky for Barron's Advisor, The Way Forward podcast. My guest today is Vinay Nair. Vinay is a serial entrepreneur academic, and author whose latest venture, Tiffin, is harnessing data, AI, and other technologies to improve wealth management practices and outcomes. In today's conversation, we separate the hype from the reality of AI and discuss specific ways that you can use AI in your business today. We also discuss how, in an ironic twist, the rise of AI and other technology will make it even more critical that we leverage whatever it is that makes us humans human. With that, please enjoy my conversation with Vinay Nayyar. So AI has been around for a long time, but it seems like it wasn't until a new version of ChatGPT came out in November of '22 that it really started to hit the public consciousness. So we've got a little bit of time under our belt now since that happened. So Would you say that the reality of AI has met the hype of AI since November of 2022?

So it's still too early for what the promise/hype of AI is to actually materialize in many applications. It's happening very, very fast, I believe. As an example, '23, let's call it, was a year of intrigue. I believe this is the year of experimentation. And the following year would be the year of scaling things up.

Okay. Now, experimentation. Your company does a lot of experimentation. So tell me, what are you guys working on right now? What are you seeing is the big promise for AI in the wealth management space?

I run a firm called Tiffin. As you know, we have several companies under Tiffin. We got into this world of AI pretty early on in early '19 when I started Tiffin. In fact, we launched our first AI assistant before OpenAI launched ChatGPT. This was in summer of '22. I was on CNBC. I remember saying, this is like Siri or Alexa went to investment school because there was no ChatGPT at the time. So we've been working on this for some time and there are several details to make this work well, especially in our industry. Obviously things like compliance, regulation, accuracy of answers, much like health, you can't go give someone faulty advice 10% of the time. So there are details that are important for productionizing this, if you will. Some of the experiments that have been successful for us is our direct-to-consumer platform called Magnify, which is in production, over 45,000 paid subscribers using it. SEC. Audited. Others that are relatively new are B2B use cases that we are working with our strategic investors on, JP Morgan being one, Franklin Templeton being another one, Hamilton Lane being another one. With each of them, we are working on AI assistants for the advisor, for the employee in the workplace setting, or for an advisor in the context of private markets and alts. So there are several agents or AI assistants that are being designed in partnership with people who either have unique data or unique distribution. We're very excited about where all this is leading us because due to the fact that we were early and we're working on multiple AI assistants, we're also seeing some of the challenges of bringing them together. And we've built some interesting IP to do that, which I think is what most enterprises will face fairly soon. Very soon as they start delving into this.

And one of the big benefits of AI and big data is the ability to personalize outcomes. So whether it's in movies or music, I think your firm is really big into how can we use AI to personalize the investment solutions, reduce friction, that sort of thing. So can you give me some examples of how you're using AI to personalize the outcome either for individual investors or to help advisors do a better job personalizing their services to their clients?

Absolutely. So Steve, our mission is better advice to more people, simply put. And more people have multiple segments. It's not just the very wealthy who have very large advisors. And so personalization means very different things in different contexts. If you look at self-directed accounts, typically today they're brokerage platforms. And there is, I would say, almost zero personalization there and also very little intelligence there. These are transaction platforms. You go there to buy something. You don't go there to get answers to questions on what to do. So Magnify, which is a direct-to-consumer platform, again, is an example where we let users connect all their holdings across all their accounts and then ask questions. That's an example of personalization for the affluent investor, if you will. Think someone who has $100,000 in investable wealth. Now, we are also working on a project where you take a client-specific CIO and give it to the advisor. So today, many advisors may get views from their CIO office or have their own views. For example, they may believe oil is going up this year or the next 6 months. They may have tactical views, they may have strategic views. The real question is, what does that mean for Steve, my client? Which of their positions is most exposed to this view? What should I substitute that with? What happens if I substitute it and the prediction does not come true? These sorts of questions are client-specific CIOs. Even large enterprises who have a Enterprise-level CIO then presents views and advisors struggle to translate that view into a personalized view. And then there's a back and forth between various teams inside organizations to do that sometimes. So we've built a client-specific CIO, which is 24/7, always on, sits next to the advisor. The advisor can say, I'm going to go meet my client Steve. What should I pay attention to? Why should I pay attention to it? How is it consistent or not consistent with various views that the organization may have?

So we talk in the industry about we need to scale the business. And I've heard people say that as a result of AI, advisors are going to be able to work with 3, 4, maybe 5 times as many clients as they do today. Now, I don't, I don't agree with that, but I'm curious when you're talking about this personalization, How do you think about AI in terms of its ability to increase the efficiency of an advisor's work?

It's a great question. It's better and more. Better advice for more people. Now, more sometimes is even though today we talk about advisors touch about 45 million households, how many people in those households do they actually touch? Very few. And I think that challenge, we often sometimes call it next generation transition challenge, etc. So more doesn't have to mean just more households. But I do believe the technology allows you to provide truly individualized answers. The onus, I think when we use the term customized, personalized, it still seems different from a category of one, if you will. So I think technology should allow you to get to individualized answers to more people and eventually help the advisor spend time where human aspects matter more and where analytical, logical, quantitative aspects are taken care of by agents.

I have a view that as the world becomes more full of technology, that the desire for humans to have that personal human-to-human touch is only going to increase. So it might be a little contradictory in that sense. I'm curious if you share that same view, and also, how do you view the balance of utilizing all of this great technology to enable an advisor to do more for the client without the advisor physically having to do it themselves? We've got this agent that's actually delivering the personalization versus the need to still have the human touch. How do you strike— how does an advisor strike that balance between using the technology to get me out of the work but still freeing me up to have the face-to-face time?

We believe that an advisor with an AI toolkit is going to beat AI alone or an advisor without an AI toolkit. Essentially, every new technology that has come on board has enabled advisors to do a better job from, pick any favorite technology you have in mind historically. And I think sometimes the debate becomes, is it technology versus advisor, which is really a faulty debate. So the question is, what is it that advisors are doing today? That is not their comparative edge relative to technology, and vice versa. And you're absolutely right, I strongly believe that the human aspects will become even more important. Just like how very early on we didn't have many asset management products. As the products started increasing, you had choice problems, and then there were layers built in between. Similarly, there'll be a lot of technology, and technology will provide choices, Someone still has to use judgment to pick among these choices. And if you just let the consumer deal with these choices, it's going to be overwhelming or very prescriptive, neither of which is an ideal solution for most people. So if you want to really provide people a sense of control with trust, judgment towards their financial goals, I don't see a world when it's entirely an AI agent doing that. I think we will have to first live in a world where AI agents are doing a lot of other tasks entirely by their own before they touch money and health to do that.

I agree with you 100% in that it's not going to be AI only, it's not going to be human only, it's going to be AI plus human that really is the winning hand here. Yet as humans, generally speaking, we tend to be creatures of habit, and so we get comfortable in the way that we do our business. We get comfortable using the tools and the softwares that we're using today. What are you seeing with advisors in terms of their desire and ability to adopt these new AI tools? Are you seeing pushback? Are you seeing there's some advisors that are the early adopters and others like, I'm just going to wait and see, or I'm fine, I don't need to worry about it, my clients aren't asking for it. What are you seeing in terms of the adoption rate here?

It's been fascinating. Unlike other technological innovations, the level of curiosity is so high that there are many more advisors that are exploring how to use it. I think there's an intent and there's almost a belief that, look, AI will be part of my practice. I just don't know how, or that AI will change our world, but I don't know which use case. So the specificity is missing today, but there is a general awareness, desire, intent, willingness to try it. I think the onus is also on technology and applications to reduce the frictions for adoption. Historically, yes, we do things, we get used to it. All that it means is switching cost is high. And so when we bring in new technologies and it's just very difficult to use it, people won't use it and they shouldn't use it. So the onus is really on the technologies. Now, AI is one of those few technologies which is designed for better engagement. That's why when GPT came out, 10 million people signed up in a few days. So I do believe this will be different because the frictions in adoption would be lower compared to a complicated software that sits on the back office or middle office that advisors have to use.

From what I can tell, the most popular application of GPT or Gemini or any of these other generative AIs is in the marketing area, whether it's writing drafts of blog posts or outlines or brainstorming for ideas for marketing-type content or writing scripts for YouTube videos. So that seems to be really popular. A lot of advisors are definitely doing that. A, are you seeing that too? And B, What would you say would be like the next step for an advisor who's using it for that sort of low-hanging fruit stuff? What would be the next step if they want to say, hey, I want to further integrate this into my practice beyond just marketing and writing some content for me?

That's right. We do see some of that too. Now, I want to emphasize though that AI is a toolkit. Generative AI is one piece of it. Supervised AI or other reinforcement AI, unsupervised AI. This all sits in this AI bucket. Fundamentally, yes, I think generative AI has captured our imagination, and so I think that's where the intrigue is the highest today. But if you pick any business problem, it could be client communication, or it could be organic growth, net new assets, or it could be advisor-client interactions or investment advice. So we start from these business problems, not from the technology. So we often start with, okay, what are the fundamental problems in this business? And then do we have a different way to solve it today because these technologies didn't exist yesterday? And there's applications of this in all of these. I spoke to you about the client-specific CIO. As a use case in there. We have a business called Tiffin AG, which focuses on AI for net new assets, acquisition, retention, expansion problems. So the problems haven't changed in the industry and they won't. I think it's, it's the same set of problems which we are just solving differently more and more. Even if it is customer service, there is a different way today to solve for that. Because of bots and AI assistants that can take an FAQ, answer things differently. The user is also changing over these years. The end individual is no longer typically just advised or just self-directed. They have their money typically in a brokerage account and with an advisor and some in their 401(k) workplace account. So Individuals are also spread out and need more support and more advice. So I think the, the fundamental problem hasn't changed. The toolkit has changed.

You made a really good point there, and I want to make sure we don't lose it, which is that you say we start with the problem and then we try and figure out, can we come up with a technology solution given our new tool sets, whether it's AI or whatever, to solve the problem? Whereas I— there have often been times where Someone creates a new technology, but it's in search of a problem that it's trying to solve. And so I'm glad to hear that you're trying to solve the problem first and figure out what's the technology. So let's talk about organic growth. That's something that the industry has talked about here in recent years. There's data that would suggest it's not very high. So, and you mentioned you've got Tiffin AG, which helps in that area. So give me more detail in terms of how an advisor can use AI to increase their organic growth rate?

We work with a large wealth management platform that asks the question, which of my clients will aggregate assets with me over the next 12 months? So this is a wallet share problem, as industry calls it. Typically, an individual has 3 advisors, and typically they have 30, 35% with any one advisor.. And we took all the data. We have a data lake with lots of different vendors and third-party partnerships. And we built a model to predict which of these clients are likely to aggregate assets with you over the next 12 months or some time period. Then the platform also started campaigns and outreaches with these folks and started learning on who responds, who doesn't respond, who clicks, who wants to meet, who wants to talk. And the model kept learning and fine-tuning. And it's a living, breathing system. That's what makes it AI. It's not just a propensity score, if you will. And that was given to a certain number of advisors, and there was a control group of advisors that the client selected. And we found that the advisors using the system grew 4.5% higher than the advisors not using the system. And this is, being a recovering academic, I think this is as, as clean of a control experiment as you can run. And in that particular case, the question had to do with expansion. We have other clients that we work with where the questions have to do with retention, or acquisition. The larger the firm gets, obviously expansion is probably more impactful. But at the same time, we built a platform where all these types of questions can be answered through systems like this. And it's an ensemble of algos essentially, that helps you address the specific question that you might want to tackle for organic growth.

Another big issue here is integration. So there are applications where it's just a single thing, I can buy it off the shelf and it's a one-off, and now I've got a new sign-on. And the last thing an advisor wants is another sign-on. Then you talk about these platforms, you've got large enterprises, you've got custodians. How do you see AI developing in terms of an advisor's ability to actually integrate this into their practice in a relatively seamless way? So you talked about trying to reduce friction. It seems like there's a lot of friction when it comes to AI and like, who's gonna be my initial source? Am I gonna get my AI from my custodian? Am I gonna get my AI from my broker-dealer? Am I gonna get it from my large RIA firm that has hundreds of other advisors and has the resources to invest in this? So if I'm an advisor sitting there thinking, this all sounds great, But how do I actually integrate it in my practice in a way that makes sense and doesn't cause me to pull my hair out?

Absolutely. How do I get my hands on it in a way that is not complicating my life? I think the industry needs to do more work on that because fundamentally, if you look at the advisor stack today, and let's say there are a few core components in there, custodian as an example, most of them are going to not be able to deliver the type of AI assistance in the timeframe that startups and other innovators are building these things. Just in the example of Tiffin, we've been doing it for 5 years. Most people started last year. So they will— and this is true with any new technological innovation. Innovators move faster than incumbents.. And this is why innovator-incumbent partnerships, you see a lot more of this with this AI wave. Microsoft OpenAI, classic example. And because speed is so important here, because speed gets you usage, gets you data, which improves the system. I believe we'll see a lot more incumbent-innovator partnerships, or I hope we will, because that allows the innovators to distribute through existing solutions that advisors use, which makes the advisor's life much simpler, easier, better, as opposed to one more new login that they have to deal with. Now, there are practical competitive reasons sometimes incumbents want to do it in-house. It's a little bit like back in the day when CRMs came on board. A lot of incumbents tried to build CRMs themselves. Tech team sitting inside trying to build a CRM. And we know how that movie played out. Everyone uses 3 or 4 CRMs today. So hopefully that learning and the desire to help the advisor fast gets the industry to form more of these Microsoft OpenAI-type partnerships and get it in the advisor's hands without friction.

Yeah, and I think it gets back to this idea of what I call a function versus a feature when it comes to technology, and that, as you mentioned, there are certain functional pieces of the tech stack that an advisor uses, whether it's the CRM system or portfolio rebalancing or what have you. There's just a small number, like pretty much if you want to be an advisor today, you got to have this. Then there's hundreds, if not thousands, of other one-off pieces of software that you can bolt on or do a one-off or have a single sign-on. And that's what I'm concerned about in terms of, as an advisor is thinking about AI, And I think what I hear you saying is you're thinking that these incumbents are going to start working with the innovators to build in the AI to one of the standard CRM systems that people are using, or one of the standard portfolio accounting systems or rebalancing systems, so we don't have to now add 5 more new AIs that are separate softwares that we've got to play with. So, you know, that's the whole friction thing. And as you say, it's an issue, but it sounds like you've got sort of a strategic view of that, that you're working at it from let's partnership with the incumbents and let's make it more of a function as opposed to, oh, here's another thing I got to sign into in the morning.

Absolutely. And a good example is SEI recently invested in Tiffin and took a stake in us, and a lot of it was driven by the desire to innovate fast. And we are working with them to, to take some things for both their advisors and for others that they support with using their technology platform.

I think another challenge for advisors is, is AI going to be a winner-take-all scenario? Meaning that you have to have economies of scale, you've got to have big data behind it in order to have relevant information and support that's going to come out of the AI. And if that's the case, if I'm an advisor, who am I going to bet on in terms of, am I going to just go with what my custodian offers or am I going to try and pick a winner? Like in social media, you know, there's a handful of winner-take-all social media platforms because of the economies of scale there. Is it going to be the same thing in AI where— because we've already seen some AI startups in the wealth management space that have already shut down. And so how do I know that I'm going to work with a firm that's going to stick around long term? What are the economies of scale when it comes to AI here?

I think it's no different from any other previous innovation cycle there. It is true that most startups don't survive. It is true that most startups have several disadvantages. In the context of AI, I would say, you know, the way we have thought about it is to address some of this. And that's why Tiffin as an ecosystem is very unique. It's a collection of companies. It's a school of fish as opposed to one big fish. So it can still scare off a big fish by appearing big, if you will. But I think we have the data, the resources, the capital, the strategic investors that a larger firm would have, but we function in pods that several startups would have. This risk you bring up is a real risk. And when I built my previous firm, 55IP, that we ended up selling to JPMorgan, it was always a question, hey, I don't want to write a long-term contract "Because I don't know how long you guys are going to be around." This is one reason I set up Tiffin the way it was set up today and we don't get that question anymore. But it is definitely another reason why you might want to adopt it through the incumbents.

I also have a belief that if you are not learning faster than the technology is moving along, you're just going to fall behind at a faster and faster rate. So what advice do you have for advisors who look at all this technology and say, "Oh my gosh, how am I going to keep up with this? I've got all these clients I got to take care of." I've got bills I got to pay, I got staff that I got to keep happy, I've got work from home or work in the office I got to deal with. What advice do you have with how do I deal with the speed of technology and making sure that I don't fall behind here?

I think we are all students again in a way that we haven't been for a long time. Whether we like it or not, there is a need for all of us to understand what's going around. Because it's an opportunity to reskill. And even if you're going to retire, your retirement is going to look very different because of what's happening in the world today. And it's an opportunity where you may not have to retire. You can go to a 2-day-a-week lifestyle. If productivity is going up 40 to 60%, which is what all the data says, a 2-day week is the same as a 4-day week. And fundamentally, I think it's an opportunity for all of us to just get into a learning mindset for about 6 to 12 months and redesign our professional and personal lives is what I believe. This is a pretty significant change that's going on, the likes of which we probably haven't seen for a very long time. So my sense is instead of— I would encourage people to to be less overwhelmed and really go back to school mindset to change. Because you might think, I only have 5 years left in my, in my advisory business, why do I need to reskill and retool? But this is not just about those 5 years. I think what you could do after is also going to be very different.

To your point, I did a podcast here with Barron's with Kevin Kelly, and one of the things that he wrote in one of his books is he said, we are always in a state of becoming. And what he meant by that was with technology, we're never there. There's no there there with technology because it's always changing and it's always evolving. And so we just have to resign ourselves to the fact that we always have to keep learning. And if we ever stop learning, to your point, like, oh, I've only got 5 more years in the, in the business, so I'm just going to sort of ride off into the sunset. Not going to happen because things seem to be changing at an accelerating pace and you're just going to fall behind faster and faster if you don't keep up. And so I think if we can all keep this curiosity mindset and just be excited about all these changes and want to learn about these things, I think it's going to give us a renewed enthusiasm for the business. So let me just wrap up with one more question here, and that is, look into the crystal ball and think about 3, 5 years from now and everything that you see happening. Paint a picture for what you think the wealth management industry might look like 3 to 5 years from now.

I have an advisor who always tells me you should never make a prediction and a date in the same sentence. So I'll tell you what I would hope to see, love to see, is truly individualized advice for everyone, regardless of income levels, delivered through a combination of human plus machine. And to do that, of course, there are several frictions, some of which you've spoken about. I think it's inevitable, and all of that will run in the background 'Cause most people, they want their money issues to be taken care of without them thinking about their money issues. And I think that's the future that we can enable, I think, in the next 5 years. So I'm hoping that prediction is true regardless of the date.

And it sounds like your firm is going to be at the forefront of making that happen.

We hope to really accelerate this for sure. Thank you.

All right. What's the best way for folks to connect with you or learn more about what you're doing at Tiffin?

The best way is to reach out to us. Our website is tiffin.com, T-I-F-F-I-N.com, and you'll see that there are easy ways to see demos of things that we do when you go to the website. So just request a demo and we'll have someone reach out to them.

Excellent. All right, Vinay, thanks for being on the show. Thank you. All right, that's all for today. Make sure you like and share this podcast through your favorite social platforms. And for more great podcasts, visit us at barons.com/podcast. Take care and be safe.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.