Latest news with #financialadvice
Finextra
17 hours ago
- Business
- Finextra
From advisors to algorithms: The shift in wealth guidance
From advisors to algorithms: The shift in wealth guidance 0 Editorial This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community. For decades, wealth management was a relationship business. Clients used to meet their financial advisors in offices, discuss life goals, and trust human judgment to guide their financial futures. However, over the last decade, a quiet revolution has taken place: one that's replacing handshakes with algorithms and intuition with machine learning. Today, millions of people receive financial advice not from a person, but from a platform. Robo-advisors, AI-driven planning tools, and hyper-personalised investment apps are reshaping how we think about wealth, and who gets to build it. However, according to McKinsey, by 2034, 'at current advisor productivity levels, the advisor workforce will decline to the point where the industry faces a shortage of roughly 100,000 advisors.' McKinsey data shows that advice revenues have been the main economic driver for the US wealth management industry. Revenues 'generated from fee-based advisory relationships [...] have grown from approximately $150 billion in 2015 to $260 billion in 2024, and growth in the number of human-advised relationships has outpaced population growth by three times in the same period.' Amid the growing demand for advice, declining advisor head count and addressing the shortage with an advisor talent and productivity system, the quiet revolution has advocated for the recruitment of new-to-industry advisors. By improving the advisor career path for entry-level talent, there is also a clear path for new sources of talent by targeting career switchers. Recruitment will not be enough. This is where generative AI comes in. McKinsey's estimate reveals that even a '30-40% average advisor adoption of more wealth-management-specific gen-AI-enabled tools and processes across the value chain and across the full advisor population by 2034 can deliver 6-12% of time savings – and, in turn, increase advisor capacity.' From suits to software Addressing a 100,000-advisor capacity shortage will be no easy feat, especially with the first wave of robo-advisors having emerged in the early 2010s, offering low-cost, automated portfolio management. They were simple, rules-based systems, efficient, but impersonal. Fast forward to 2025, and the landscape has evolved dramatically. Modern AI-driven platforms don't just rebalance portfolios. They analyse behavioural patterns, anticipate life events, and tailor advice to individual goals, risk appetites, and even emotional states. What began as a cost-saving tool has become a sophisticated engine for personalised wealth guidance. As Sébastien Payette, director consulting expert, financial services, CGI, writes, robo-advisors are becoming an 'integral part of investment strategies for both retail and high-net-worth (HNW) and ultra-high-net-worth (UHNW) investors.' He points to three key trends: 'Hybrid advisory models – Traditional financial institutions are incorporating robo-advisors alongside human expertise, offering a blend of automated technology and personalised, face-to-face financial guidance. Hyper-personalisation – Advanced robo-advisors utilise AI-driven insights that integrate financial market data with investors' digital footprints, tailoring investment strategies to unique financial goals, risk appetite, and life stages. Diversified asset offerings – Robo-advisors are expanding beyond equities and fixed-income products to include alternative investments such as derivatives, real estate, private equity, and cryptocurrencies, broadening the scope of automated wealth management.' What AI does better Payette also explains that smarter AI and predictive analytics through robo-advisors 'will leverage even more advanced AI capabilities to predict market trends and mitigate risks, leading to increasingly optimised portfolios and investment strategies.' AI's appeal lies in its speed, scale, and objectivity. It can: Monitor markets and portfolios in real time. Optimise tax strategies across multiple jurisdictions. Detect behavioural biases and nudge users toward better decisions. Offer 24/7 access to insights, no appointment necessary. For younger investors and the mass affluent, these tools offer something traditional advisors often couldn't: accessibility. With lower fees and intuitive interfaces, AI has opened the door to wealth planning for millions previously priced out of the conversation. As the World Economic Forum states, 'large language models (LLMs) are still evolving. They are expanding beyond robo-advisors, progressing from chatbots to assistants to agents, reducing the advice gap for retail investors. 'The essential question is can AI systems deliver the level of emotional intelligence and empathy required by investors to share information and needs in ways they do with their human advisors, i.e., could machines ever replace human advisors?' But what's lost? Despite its advantages, AI lacks something essential: human empathy. Financial decisions are rarely just about numbers. They're about fear, ambition, family, and identity. A human advisor can read between the lines, sense hesitation, and offer reassurance. An algorithm, no matter how advanced, can't replicate that, at least not yet. There's also the question of accountability. When an AI-driven platform makes a poor recommendation, who's responsible? The developer? The firm? The user? As AI takes on more advisory functions, these questions become more urgent — and more complex. Can AI wealth models be credible? Yes, by processing vast datasets with speed and precision. Agentic AI can also integrate collaboration with human experts, which strengthens the credibility of the systems. Can AI wealth models be reliable? Yes, AI is consistent and free from human error, but there are transparency concerns. LLMs can offer guidance and with modules such as retrieval augmented generation (RAG), context is enriched. Can AI wealth models be intimate? Yes, AI can recognise sentiment, but cannot offer the lived experience and cultural nuances that humans can. Can AI wealth models be self-oriented? Yes, AI can operate without personal biases, but the data its trained on or how it's deployed by financial firms may introduce conflicts of interest. Regulatory oversight may be needed to ensure AI acts in the best interests of the clients, and recommendations are not biased. The rise of hybrid models Rather than replacing human advisors, many firms are now blending the best of both worlds. This transformation or phase of the evolution requires a balanced approach that capitalises on AI systems but preserves human touch. This is how trust-based relationships can be built in wealth. These advisors can use AI to handle data-heavy tasks, while humans focus on relationship-building and strategic guidance. It's a model that promises both efficiency and empathy, and it's gaining traction fast. In conversation with Finextra in 2023, Renato Miraglia, head of wealth management and private banking, Italy, at UniCredit, says that human beings will continue to be essential in the relationship with private and wealth clients into the future, but the use of data and technology will change the analytical tools with which client materials are produced. He cites the value of generative AI to create highly personalised and detailed real-time reports and analyses on the peculiarities of each client's position. 'The wealth manager of the future will use new and sophisticated tools to analyse risks and investment opportunities – and this will improve the accuracy of financial planning. The next generation of tools consider key elements in an integrated way, taking a holistic view of factors such as the interaction with real estate or business assets, changes in lifestyle, and elements of risk that can be secured through various forms of insurance,' Miraglia elaborates. The next evolution The future of wealth guidance may not be about choosing between humans and machines, but about redefining the role of each. As generative AI becomes more conversational and emotionally intelligent, it could take on more nuanced advisory roles. Meanwhile, human advisors may evolve into financial coaches, helping clients navigate not just markets, but meaning.
Yahoo
a day ago
- Business
- Yahoo
These 5 Tax Hacks Could Get You Audited
It can be hard to sort the legit financial advice from the sketchy, especially when you get your advice online. If someone is recommending an easy 'tax hack,' this should be an immediate sign to stop and do your research, or get professional advice, before you follow suit. Some of these hacks could get you audited and cost you money down the road. Find Out: Read Next: Tax experts explained which tax hacks to avoid and which to use carefully so you don't get audited. Claiming All Rent or Mortgage as Home Office Deduction For self-employed people or those with a freelance side hustle, you're already on the IRS' radar, because it's easy to call things business deductions that aren't. While you are legally allowed to write off a portion of your rent or mortgage based on certain criteria, according to Robyn Little of The Little Tax Co., you should not try to deduct your entire rent or mortgage payment. 'Listen, the IRS is not green to what people are up to — and trying to beat the system usually just gets you flagged. What people think is a hack is often just a shortcut to an audit,' Little said. Learn More: Claiming Mileage, Meals and Other Non-Business Deductions Again, while you are legally allowed to write off some expenses such as mileage, meals and home office expenses, these have to be truly qualified business write-offs, and a lot of people try to fudge these, Little said. Other personal expenses masquerading as business deductions include calling a vacation a 'work trip,' or writing off beauty supplies and memberships, according to Hector Castaneda, CPA, founder and principal at Castaneda CPA & Associates. 'Similarly, most people think you can write off gym memberships, haircuts and makeup. While there's an exception to almost everything, those costs are generally non-deductible unless they can be proven to directly improve your business,' he said. '[The] IRS sees through that quickly,' he added. Claiming a Super Low Income If you report a 'super low income claiming big refunds' this can raise red flags with the IRS 'especially if your numbers don't make sense with your lifestyle,' Little said. For example, if you're claiming $15,000 in business expenses but taking luxury trips every other week (and posting about it on your social media), the IRS might come knocking. Underreporting Income From Payment Apps Additionally, underreporting income, specifically if you get paid through software's like PayPal, Cash App and Venmo, is a 'sure fire way to get a nastygram from the IRS,' Castaneda said. 'They'll get a copy of the income you report and yours should always be either higher or the same because of the cash component. Simple calculation errors or even information that doesn't match the IRS records (e.g., address changes, name changes, dependent changes) are the easiest ways to get flagged for further review,' he said. Rounding Numbers on Your Return If you're rounding numbers up or down to fudge details or even just make your accounting simpler, this is likely to get you into trouble, 'Because real expenses don't come out in even numbers. If your return is full of $500s and $1,000s, it looks like you're making stuff up,' Little said. It's better to keep actual receipts and use real numbers, not guesses. Caveat Emptor Take all the online influencer tax tips with a grain of salt, Little insisted. 'Just because somebody went viral doesn't mean they're giving accurate tax advice. A lot of folks are just posting for engagement, not facts.' Castaneda added, 'The smartest thing you can do when you hear these 'tax gurus' speak is first verify their credentials.' Always run it by a legit tax professional before you try anything you see online. Some of these 'tips' will land you in trouble. Do This Instead Avoid hacks and instead keep your receipts, track your income and only write off what you actually use for business. 'Don't try to beat the system — learn how to work within it. There are legal ways to save, you just have to know the game and play it smart,' Little said. Better yet, 'Bring all of your tax information to a trusted tax professional, have support for everything and, even then, you could still be audited,' Castaneda said. However, an audit is not concerning if you can substantiate it. More From GOBankingRates Are You Rich or Middle Class? 8 Ways To Tell That Go Beyond Your Paycheck This article originally appeared on These 5 Tax Hacks Could Get You Audited
CTV News
a day ago
- Business
- CTV News
Sponsored: protect yourself from "finfluencers"
Edmonton Watch What are "finfluencers" and why is it so important to keep some risks in mind when listening to them? Hilary McMeekin from ASC explains.
Yahoo
a day ago
- Business
- Yahoo
The Best $250 You Can Spend on Retirement Planning Before the End of 2025
Do you feel like you're grappling in the dark when it comes to retirement planning but aren't sure where to turn or if you should spend money to get those plans in order? If you have even a few hundred dollars, there are a few ways you can use that money to make a significant difference in your retirement goals. Be Aware: Read Next: Christopher Stroup, a CFP and owner of Silicon Beach Financial, offered tips on the best $250 or less you can spend on your retirement planning before this year is up to feel confident in where you're going. An Hour With a Fiduciary Advisor If you only have a couple hundred dollars to spend, Stroup recommended you spend it on a one-time planning session with a fiduciary advisor who specializes in retirement planning. 'A targeted session can identify overlooked tax strategies, prioritize savings vehicles and help avoid costly missteps,' he explained. Even just a single hour of personalized advice can provide more clarity than weeks of online research, especially for entrepreneurs or tech professionals navigating equity, cash flow and multiple income sources, he said. 'Look for advisors who offer project-based or hourly services and focus on tax strategy, Social Security and withdrawal planning,' he said. You should come away from a one-time session 'with clarity, not a sales pitch.' Learn More: A Social Security Timing Analysis Another great way to spend a few hundred dollars is to get a Social Security timing analysis, Stroup said. 'For under $250, you can model break-even ages, spousal benefits and the impact of delaying benefits.' This analysis is important because this single decision can mean tens of thousands more over your lifetime, especially for dual-income households or individuals with uneven earnings histories, Stroup explained. Strategic Tax Planning If you feel you have more questions for a fiduciary advisor than can be summed up in an hour, consider focusing the session around strategic tax planning, Stroup urged. This can help you avoid future Medicare surcharges, minimize required minimum withdrawal (RMD) taxes and better time Roth conversions. 'A well-timed projection can reveal opportunities that disappear at retirement or when tax brackets shift. Spending a few hundred now can prevent five-figure tax mistakes later.' Invest In Planning Tools, but Be Cautious For a low annual cost, tools like Boldin's retirement planning tool allow users to stress-test income scenarios, Social Security timing, Roth conversions and healthcare costs, Stroup said. Retirement planning tools that map out your income, expenses and drawdown strategy can be useful. They can also help you understand your 'burn rate' and how to sequence withdrawals to prevent common missteps that derail early retirement plans. However, Stroup warned that the simpler, more DIY tools can make it too easy to 'underestimate taxes on withdrawals, mistime Social Security or hold too much in cash or high-fee funds.' Thus, a small investment in expert guidance or advanced planning software can flag these risks early before they compound over decades. More From GOBankingRates How Much Money Is Needed To Be Considered Middle Class in Your State? This article originally appeared on The Best $250 You Can Spend on Retirement Planning Before the End of 2025 Sign in to access your portfolio
Daily Mail
2 days ago
- Business
- Daily Mail
I'm a wealth planning expert: Here's why you must always ask your financial adviser for the 'all-in fee'
Charlotte Ransom is the co-founder and chief executive of wealth manager Netwealth. Did you know that you have the right to ask exactly what 'all-in fee' is being charged by your financial adviser, planner or wealth manager. If you are a longstanding client, you might well be unaware of the total amount you are now paying, and will never find out unless you ask because advisers do not typically issue an annual invoice. Instead, fees are taken directly out of your investments, Isas or pension fund, so you might not notice the big inroads they are making into your overall returns over time. The fees advisers levy in this way include not just their own, but those for any third party services they use on behalf of your account, such as platform or custodian charges. Your right to be told about every individual item or service you are paying for, plus the most important 'all-in fee', is a rule set by the Financial Conduct Authority. But too few clients who come to my door are aware that advisers MUST provide this information - not only when you first sign up for their services, but on your request at any point in your business relationship with them. Getting a full fee breakdown, plus the 'all-in fee', from your adviser is important for the following reasons. First, once you know the total fee, you will be armed with key information when you look around for the best deal to fit your needs and circumstances. Second, the size of the fees has a significant and compounding impact on your investment returns – this can get lost when investment markets are strong, but they make a huge difference to the money that ends up in your pocket. Let's look at what you should ask your adviser in terms of fees, and then how to make the best use of the details you receive from them. What to ask a financial adviser, planner or wealth manager about fees Ask for a full breakdown of fees and the total 'all-in'. If you are not given a satisfactory answer or don't understand the answer, do not be put off! Ask again! If an adviser fobs you off or the fees they provide aren't clear, that's a red flag and may breach FCA rules. (It should go without saying that you should only use an adviser registered with the FCA - check here.) If you detect any uncertainty or reluctance on the part of an adviser to be completely transparent on any fees, steer clear. If you don't understand any of the terms used, don't hesitate to ask for an explanation. But here is what you can expect in a full breakdown that the all-in fee will consist of. The fee list you are given will broadly cover the following areas. - Upfront fee for initial planning - Ongoing investment management and advice fees - Platform and fund fees - Other third party fees and tax Regarding ongoing fees, you should receive regular updates on charges, and advisers must prove they're delivering value for the service you are receiving, for example during annual reviews. Here's a more detailed list, explaining some of the jargon you will come across. 1. Annual management charge (AMC) - A percentage fee for managing your investments, often between 0.5 and 1.0 per cent per year. 2. Platform or custody fee - Charged for holding and administering your investments. This can be a flat fee or a percentage of your assets. 3. Fund fees (ongoing charges) - Additional costs from the funds used in your portfolio. These fees are on top of the AMC and taken at source by the funds themselves. On passive funds, those that track market indices, you can expect these to come in between 0.1 and 0.4 per cent. For active funds, run by a professional manager, they will usually be between 0.6 and 0.9 per cent. 4. Trading or execution costs - Charged when buying or selling investments. These are often not shown since they are estimates, but should be understood since they may add another 0.10 to 0.25 per cent in costs to your portfolio per year. 5. Financial planning fees - These will be charged on top of the AMC for financial planning related to topics such as Isa or pension contributions, retirement planning, tax optimisation, gifting and so on. Advice and financial planning fees are often 0.5 per cent to 0.75 per cent per year. 6. Upfront/initial fee - Most advice firms charge an upfront fee for an initial report on your assets and overall circumstances. They may also charge an upfront fee every time you add to your account, for example for an annual Isa contribution. This fee is often between 1 and 3 per cent and is charged in addition to the ongoing financial planning fees. 7. Exit penalties - These are now rare but it is worth checking to be sure. 8. Tax reporting fees - Annual tax packs (for capital gains tax and income tax) may be included but it is worth checking. 9. VAT - Not all quoted fees include VAT, so check if it applies or whether it's added on top. 10. All-in fee - The FCA reviewed financial adviser charges in 2020 and found clients were typically paying 2.4 per cent upfront and 1.9 per cent in total ongoing charges per year. If you combine the two figures that works out as 2.14 per cent a year over 10 years. What to do when you know your all-in fee Investment performance matters of course but fees are the key aspect that you can control when it comes to having your money managed. It is the 'net-of-fee' return which will most impact your financial future. If you shop around, you should be able to beat the typical 2.14 per cent a year over 10 years quoted above and cut it by 1 percentage point. An annual fee saving of 1 percentage point on a £250,000 investment portfolio or pension fund is worth £2,500 every year, and over 10 years is a saving of £34,000 based on 5 per cent growth. Here is what that saving in annual fees represents based on annual returns of 3, 5 and 7 per cent on investment or pension pots worth £100,000, £250,000 and £500,000. Shop around for the best adviser, planner or wealth manager In order to find an adviser, for the first time or if you decide you want to move on from your current firm, be clear on what you need. There are a wide range of service providers from smaller independent advisers to large wealth managers, as well as hybrid propositions which provide both investment management and financial planning advice enhanced by modern technology. Investment managers will run discretionary portfolios on behalf of clients – their job is to invest in globally diversified equities and bonds to provide a range of investment returns to meet clients' goals. Financial planning services will tend to cover the same important areas such as planning for retirement and optimising tax efficiency. The key difference is most likely to be in charging structures, and once you know a firm's full set of costs and charges it will be easier to compare to other providers. Remember that it is never too late to change adviser or wealth manager, regardless of what fees have already been paid. Investment and retirement horizons last a very long time and now – equipped with more information – it's important to ensure that your money is working as hard as possible for you, not for someone else.
