The future of financial advice

Advisory firm executives who underestimate the transformational potential of AI are putting their businesses at risk,, says Mike Floyd, CEO and co-founder of ThinkForces Advisory Group.

On this week’s edition of the Canadian Advisor.cast, Floyd says the new technology will demand a new operating model.

“It impacts every piece of the business,” he said. “It’s not just a technology project. This should be looked at very much as a business-model transformation.”

Floyd came to Canada in 1995, to join Scotiabank. He provided financial planning support to the bank’s branch network of more than 3,000 advisors in those days. By 2002, he had moved into fintech, joining CGI, the IT consulting and software development company based in Montreal. He launched ThinkForces in 2024 with Paul Javadi.

Floyd is optimistic about the industry’s future, and unworried about AI replacing financial advisors. But he’s been around long enough to know that the industry faces a genuine disruption, and that there will be high-profile failures as this plays out.

“Blockbuster were experts at delivering videos to clients,” he said. “When advances in technology enabled Netflix to look at a new delivery model, Blockbuster wasn’t able to adjust.”

So yes, big change is coming.

Half human

Floyd is a proponent of the centaur AI model, developed by chess grandmaster Garry Kasparov after losing to Deep Blue, the IBM chess computer. Kasparov later developed what he called “advanced chess,” based on the idea that humans and computers working together could outperform either on their own.

The model has obvious applications in financial advice.

“The implementation of AI can enhance the [robo-advice] model,” he said. “It can also lead to predictive modelling, which allows the advisor to come and join the journey when the client’s needs are appropriate.”

If Floyd is right, the shift could disrupt traditional robo-advisors that cannot provide access to human advisors as clients’ planning needs evolve. Those firms are well aware of the issue. Wealthsimple has promoted its version of a centaur model since 2021.

Traditional advisory firms that adopt some version of this model could engage younger mass-market investors earlier in adulthood instead of sending them to another company’s app and trying to win them back later, once they reach an investable-asset threshold.

The transition will be incremental, and entirely personalized. “They will progress into the need for direct human-in-the-loop financial advice,” Floyd said.

Firm CEOs who aren’t actively engaged in building this right now are at risk. This is not a CIO assignment. It is a board-level challenge that “requires a radical change in mindset in how business is done,” Floyd said.

“Relying upon the old business models, or trying to maintain momentum under an old business model, is going to be fraught with risk,” he said. “If they don’t do this right, they’ll progressively lose ground.”

Canadian Advisor.cast is available in both video and audio formats, via Advisor.ca, Spotify, Apple Podcasts and YouTube.