A (3:26)

So Ian, when you think about AI, and particularly as it relates to the financial advisory space, what does that mean? What comes to mind on that?

C (3:35)

Well, first and foremost, thanks for the shout out, Dave. I appreciate that. Well, AI is not magic, right? It's pattern recognition and prediction at scale. It takes what used to be human judgment and just accelerates it. I think for Advisor, AI means lowering the time and cost of growth on the front office. I think when you look at the mid and back office, it's doing the same with respect to onboarding, client management and portfolio rebalancing, so on and so forth. Right. It's impacting every part of an advisor's practice. And I think with respect to lowering the time and cost of growth activities, I think, you know, we've leveraged AI to drive innovation and transformation from lead generation to compliance while maintaining personalization. So that's really kind of what it has meant to me since we've launched Vast Advisor.

A (4:29)

Well, and Ian, I think, you know, when I talk with advisory businesses that have hesitated to very purposely lean in around AI, it's concern over its potential to in their minds potentially diminish or detract from the client experience, the personal experience they're looking to deliver to their clients. And I think a lot of people listening today would say this actually can be highly supplemental if done the right way. It's not a detractor per se, and we're going to talk a little bit more about that. But I think both of you have hit on something. You know, when we look at our Global Advisor study, our benchmark study from this year, the number one challenge for growth across the board, high performing firms, other firms, us, non us, all of that is capacity constraint. And it's primarily focusing around that advisor talent and their ability to bring on more clients do that effectively. We know high performing firms. Even with that said they're still at least onboarding clients around eight weeks versus nearly 11 weeks for the other firms in our study. So they're still figuring out ways to kind of get clients onboarded, things like that. But when you think about solving for capacity constraint, this is absolutely, I think why AI has been so fired up. I'm sure you're both seeing that within your own businesses and with the advisors you're talking with. So Ian, when you think about key areas of focus in an advisory business and 70% of respondents in our study said they're using some form of AI, it's probably a little bit more in the category of note taking and things like that. And I think, you know, there's like lots of which is important, you know, excessively, almost get, get things automated as much as you can. But when you think about key opportunities within an advisory business, that AI can be a resource, what comes to mind?

C (6:17)

Yeah, I think the opportunity is systematizing AI into what we call the operating for the business, right. Not just dabbling with note taking apps or drafting an email. And I think the key areas of focus, again from our perspective, we see huge opportunity with respect to client acquisition. Right. Moving beyond traditional tactics that have driven organic growth for advisors to date. You know, referrals, network marketing to AI powered ad platforms, the ability to leverage AI to do audience insights and segmentations and attribution. You can't just solve for that without solving for the compliance piece. I think both walk hand in hand. So real time monitoring against SEC and FINRA guidelines with respect to leveraging AI for driving organic growth and then obviously the automated workflows that drive efficiencies, freeing up advisor times and then the predictive insights for AUM growth and client retention will be kind of the core elements to driving systematic organic growth that's predictable and scalable and reliable.

A (7:29)

And so Dave, when you think about prosperity capital and you're wearing a couple hats, as you mentioned, looking at it through the advisor lens, but also through leadership of an organization, what was sort of the quick areas of focus for you all as you embarked on this journey?

B (7:45)

As I reflect back over the last couple years and you know, our journey into, you know, probably being a little bit on the forefront of trying to integrate this into our corporate culture and strategy, I really can see a couple key areas. Areas number one, you know, I, I believe financial planning and wealth management is a deeply personal, personal business. Right. Like I think that we could have amazing lead generation and marketing that brings the lead to the table. But at the end of the day, people do business with people that they know, they like, they connect with, that they trust. And that takes human effort to spend time building that trust. I think you see the most successful advisors in the country, or in the world for that matter, are the ones who are really good at that human. The challenge why people struggle with growth is that at a certain level, a lot of those really good advisors get bogged down with all of the obligations, right? There's only two things we can do as advisors. There's take advantage of opportunities and then fulfill our obligations. And so what we've seen is that if we can reduce the minutia, right, that an advisor has to do to be able to fulfill the obligations that we have, they can free up time and capacity to get out there and do more of the rain making work, the personal connection, the follow up, the business development. So, you know, there's a lot of different examples I think, that we've all seen of this in action. I'll just give you a couple. I mean, I had one of my ultra high net worth clients the other night who was like, hey, I'm thinking of joining this partnership and making this substantial investment in this commercial real estate building in San Diego. Here's the offering memorandum. Here's what the deal would look like. What do you think about this? And like a year ago, that would have taken me probably an entire day as the lead advisor to dissect that, to figure out how it fits into his goals and objectives, what type of risk and liability that would come with it, how that would impact his other businesses he operates. And the reality of it is I was able to take all of that and upload it into ChatGPT without PII in it. And I wasn't using ChatGPT to be the intelligence necessarily. I was using ChatGPT to be my thought partner. At the end of the day, I'm the subject matter expert, not chatgpt, right. But I was able to use it to really frame out the decision making in the context and the strategy and really interview me about how I feel like this could or could not align with the client and their goals and objectives. And like what it would have taken a day. Took me about 30, 40 minutes to draft a really curated response of what I think about it, how we would need to do more due diligence. And so what that does in hindsight is it frees up the other seven hours of an eight hour day to go meet new relationships or do other things that can be incredibly meaningful. And so I Think that's just one area that the better that a wealth management team and advisory team leadership can really drive AI to be a strategic thought partner. It compresses the time massively to get to a really good outcome. And the more we can compress time on the minutia, the more we can expand time on the abundance driven opportunities that are out there.

A (11:18)

So are you at a place in the business now where you feel like you can really start applying a sense of this by doing this in leveraging AI, we are getting X minutes, hours, days, maybe even back in to the business. And therefore my advisors for example can now work with 150 clients, not just 85. I mean are you getting into that space now from a true data usage of what's happening?

B (11:47)

100%. And you know, a couple years ago when I started on this journey, I saw it with myself and I kept kind of talking when I speak across the country and saying like I have the ability to be a 10x advisor, I can go take on 10 times the amount of clients because I have more capacity. And we've started to see that now transition to other power users. And I think like for us the first thing was like what's the easiest way? And I know we joked about note takers before but what's the easiest way we can get our advisors to start to experience the productivity gains? And for us that was like mandating the note taking across the company and saying like just get out of the weeds on this. Let's build a system where the note takers in the meeting then we have the second chair advisor who's cleaning up the notes, setting up the action items. And what that's done is that might free up 10, 15, 20 minutes post meeting for that advisor to go do other things that are more productive. And we started seeing gains there. And then we started sharing examples of client communication. And again we joke about writing emails but I'll give another example of where that's really fit for us is recently we did a delivery meeting where we delivered a client's plan and their investment strategy. And just like a lot of clients do, they came back with a long email of you know, five, six, seven really important questions around dimensional and the strategy and what we're positioning and why and everything. And what I was able to do is take that email into chat GPT and say be my thought partner, help me curate a really balanced, detailed response that puts this client's mind at ease. And listen, I could have sat there and done that and it would have probably taken me 45 or 50 minutes, but me and my strategic thought partner ChatGPT did it in 10 or 15 minutes. And I was able to upload a lot of the information on Dimensional uploading, a lot of the brochures, the science of investing and all these other things. Imagine I had one of the top VPs at dimensional right there, side by side helping me curate this email and that's what I was able to achieve through the uploading of the content and the delivery of that. So those are things that we are seeing huge productivity gains.

A (14:02)

Ian, I see you nodding as Dave talks about productivity gains, capacity gains. Talk a little bit about what you're seeing as you're engaging with advisors.

C (14:12)

We talk a lot about customer acquisition cost, right? What the average customer acquisition cost CAC is within wealth management to acquire a new customer and it hovers between three to $5,000 traditionally. Do you know what percentage of that cost is related directly to the time that the advisor had to traditionally engage prospect, nurture that prospect and build that trust? The percent is massive. It's 87% of that 3 to $5,000. 87% of that CAC is in the time traditionally that the advisor has had to spend. Right. So to Dave's point, like using GPT as a thought partner and the tooling that it now enables Dave to very quickly provide a structured analysis with his domain expert expertise and equally important, the trust that he has built with that customer becomes this just force multiplying asset within the business. We're beginning to see that like 10x is I think the beginning of the capacity gains that we will continue to see in the near term. And so then imagine what that unlocks within this space or unlocks for an advisor like Dave. Yes, you're going to be able to spend more quality time with your existing portfolio of clients, adding substantial value, not just with GPT as a thought leader or Gemini or cloud or whatever the tooling you're utilizing, but beginning to leverage systems that now leverage decision intelligence. These are things like envestnet's working on and they're doing some amazing work with predictive insights like beyond just being a thought partner, how can we now lead you in some really meaningful ways? And so I think that's really exciting and that then opens up the aperture for the marketplace in some interesting ways as well. So we know everyone competes for the ultra high net worth and the mass affluent. Everyone's there and that's never going to change. Right? We're going to be able to spend more Resources adding more value to those segments. But we also have emerging segments that are now presenting themselves as opportunity. There's $7 trillion in assets in emerging segments that are often overlooked in this industry that I think will become part of the market share growth over the next five years in this industry. Because you know, advisors now have the capacity to be able to take that on. They'll of other AI tools like the tools that we're building and other smart companies are building to be able to target, onboard, manage and build lots of value across all of those segments. So yeah, it's an exciting time to be in the industry.

A (16:58)

And I would add to that Ian, that in addition to really being able to robustly go after additional client segment opportunities, work with different types of clients even over time, that's not just going to be a mid or large size firm opportunity that because of this technology, because of this AI, you could quite literally be a sole practitioner and be able to effectively, efficiently and profitably engage with these types of clients. Now I'm the first to say that over time there's scale, there's processes, there's certainly momentum even for as firms get bigger and bigger and bigger. We just introduced this year in our Global Advisor study a 50 million plus revenue peer group because you all just keep getting bigger. But I think there's still more new advs filed every day than there are not relative to advisors coming into the space. I'm excited to see what this is going to mean in terms of the opportunity and the pace of scaling up for let's call them smaller to even slightly mid sized firms that just didn't have that opportunity in the past. It's pretty exciting I think right in.

C (17:59)

The AI spaces we talk about what's the first five person company that will reach 100 million in revenue, right by leveraging these tools. We've been talking a lot about efficiencies, right. And capacity growth. Cost reduction is another outcome of this beyond just the 87% of the CAC that's represented by the advisor time that we're now getting back. But also when you look at platforms like the lead brokers, the smart assets and the Zoe's that have been playing an important role up until this point, but it comes at a very, very expensive line item in your opex for your firm. I mean I know some of these firms, when you look at the big ones like the Ritholtzes, the Carsons, the Hightower, they spend millions and millions of dol with lead brokers like smart assets. And I know you know, mid sized and smaller firms that becomes a barrier and how they can become a digital first or AI first firm in this new era. And I think there are huge opportunities to begin to systematize organic growth beyond having to leverage lead brokers and radically reduce that line item, that cost item in your firm and drive significantly more revenue and profitability for the RIA as well.

A (19:13)

Well, I will share with you and I'll share with our listeners. There's probably a bit of noise in the data as always, but as best we can, we do calculate a break even dollar amount within our study. And you know, huge credit to David Turner on my team that's really been working to get to a good number because lots of firms don't know what the true cost of acquisition is or the true cost of a client over time. For our high performing firms in our study, and that's a very specific criteria, these organizations grew on a median average year over year revenue rate last year of 23% versus 16% for the other firms in our study. So those firms clocked in at a break even price of around 3,500 versus 5,500 for the other firms in our study. And so both of you talked about what is the impact on business over time and not for what it's worth, to simply justify the spend on AI. That's important if you're going to make an investment in something, you do want to know what that ROI looks like, but what is its true impact on the business overall? And both of you have touched on this. I'd love to start with you, Ian, and then Dave, get your perspective as it relates to the compliance, the governance side. That is a top reason why organizations have said, you know what, we're going to hang out here on the sidelines just a little bit. We don't know exactly how this is all going to shake out from a regulatory standpoint. How do I go about developing a policy around AI within my organizations? I often say the only thing worse than not having a policy is having one that you don't adhere to, that's probably going to get you maybe in a little bit more trouble with an auditor or regulator. So with all that in mind, Ian, when you do or when you're working with advisors and trying to think about this compliance governance piece as it relates to AI, where do you start? What's your key areas of focus on that?

C (20:55)

I think governance, there's kind of an equation in my mind, right? Governance equals compliance, guardrails, vendor selection and culture. I think when we are engaged with an RIA and they're looking at our tooling and some of the innovations that we've made around real time compliance monitoring. With respect to leveraging digital first tactics to drive organic growth, we stress balance, right? Use AI where it adds value, but make sure you have the right guardrails in place. That's why we couldn't just innovate around an AI based ad platform to democratize leveraging these massive channels where prospective investors live that have not really been leveraged widely by the sector without first really taking a serious look at what innovations also need to drive the compliance piece of this. And when you think about it, that is the thing that drives costs and time both negatively impact being digital or AI first. So when we talk about CAC customer acquisition class, if you fully load in the weight of compliance, it blows it out of the water. To make that fully loaded CAC work, we have to think about where can we apply AI in a very practical way to do real time monitoring of content, real time monitoring of the SEC and FINRA guidelines and what gets published there in real time fine tuning of the agent so that it's never caught on its back foot. And in our tool we came up with a firm scoring mechanism. Every firm starts at 100. And then as our compliance agents catch SEC or FINRA issues that get flagged, we analyze the issue and then we provide a recommendation how to mitigate that. Or you have a workflow where you can have your compliance team review, modify and approve it. The scoring gets impact. But ultimately that firm wide score is a confident score for a compliance team. And that's why we had do it. Because I think compliance teams have to get comfortable with this new tooling, have to feel confident that it's consistent, that it's working. And we've even built testing tools to give them the ability to get even more comfortable with it so that you don't have to run campaigns or have deployed assets out in the marketplace before our compliance team has the ability to try to break it, try to tip over the compliance agent. That's one of the ways that you're going to build confidence by them seeing the consistency of its ability to perform. And if we can do that, then we're going to solve for a massive, massive challenge that's been present, particularly in becoming digital first or AI first. That's going to unlock it.

A (23:34)

And a challenge that's, I mean, at a minimum, obviously it's not going to go away, right? We're in a regulatory environment, heavily written it's always going to be there, but also one that it's not static. And so how do you stay on top of that? It's why so many organizations, you know, you have your amazing chief compliance officers. If you've not shared love on your compliance officer recently here, please go do that today. Because they literally hold you all together, but they're obviously the really great businesses are also leveraging outside resources because it is such a dynamic movement, moving environment. So how do you sort of add this to the pot and stay on top of it? So, Dave, when you think about even just your advisory business, but even the platform, that is prosperity, what does that look like for you? All relative to the evolution of policy and the usage of AI, sort of the guardrails, as Ian referred to it?

B (24:17)

Yeah, it's certainly a challenge and something I think a lot of firms need to pay close attention to. I mean, I don't think any of us want to be the first example that the SEC decides to make because we don't have the right policies and procedures and protocols in place like that. It doesn't sound like very much fun. So we spent a lot of time last year making this a big priority.

A (24:35)

That's why you're not the chief compliance officer, David.

B (24:38)

You know, but I spent a lot of time in this because I am not the cco, but I am a big nerd when it comes to AI. And I mean, one of the things that keeps me up at night is making sure we have the right protocol to protect our client data because again, we're in a trust business. And the minute we start losing that trust, it's a challenging uphill battle. And so what we kind of came to is we had to really segment our compliance and AI polic into, you know, I would say kind of like three tranches, one for what we expect of our internal team members. So what systems, what policies, what procedures, what data they're using, who's getting access to what. The second is the policies and procedures for our financial advisors, how they're using it, what they're using, how they're making claims about AI. And then kind of a third overlay is of course, all around PII and how we're thinking about that differentiation of what systems we're building enterprise level deals with, where we know we've got a lot more authority and control of PII versus, you know, if, if our marketing team is working on building a new educational workshop on tax management, like that's not as big of a deal. Right. So we've kind of built those guardrails. And obviously to your point, there's accountability of making sure people are abiding by the standards and the resources that we have. But compliance has also been a really big opportunity because again, I go to where I opened the conversation. For us, AI is three things. Increase employee productivity, increase operational efficiency, and innovate products and services. And at our firm, we're, I guess, what would be considered a scaling platform. Ria, we've got really talented advisors around the country and I think one of our unique advantages is that we curate a ton of great marketing content. We write books, we do workshops, we put out blogs and content and just so much information between C2P and Prosperity Capital Advisors. And I think that attracts people in. I mean we all know like the old SEO way of ranking was delivering personalized, relevant and timely content with a fiduciary responsibility. Absolutely. Making sure it's compliant, approved. And so when I started looking at like how AI can impact our organization, one of the things that AI does incredibly well is do repetitive routine tasks really quickly, over and over. And for us, one of those repetitive routine tasks that was starting to create a bottleneck was just compliance and advertising review of all of this content. And so our chief compliance officer, our head of supervision and compliance, they're really forward thinking younger guys, they worked in ChatGPT and they built a custom GPT around SEC rules, marketing and advertising rules, the SEC marketing rule, our own policies and procedures where now when an advisor submits a blog, a workshop, a podcast script or whatever it is, they can just upload it to the GPT and it's going to say like green light, you're good. Or maybe yellow light, human needs to review this. Or red light, this thing's crazy. Like, and, and just declined it and sent it back. But like that's a huge example of employee productivity, operational efficiency and showing compliance. AI is not a bad thing. AI with the right application is an incredible resource for us.

C (28:10)

Hey Katherine, if I could add, just really quick, I just came back from Future Proof and one of the discussions that we had, I was being interviewed by envestnet on a podcast there and they said, of all the things that you could get rid of in wealth today, what would you get rid of? And I, and I said the steak dinner and the five hours that typically come along with that. And I said, because you have to understand where the next generation of investors are coming from. They don't weigh like heavily referrals, they're not buying into the steak dinners. They're consuming content like podcasts, like the content that Dave and his firm is producing on a regular basis. So I said podcasts over porterhouses. That was the point. But what Dave is doing from a content perspective is the future for wealth and how they're solving for and integrating AI. AI into compliance workflows is genius. Like, we're gonna have to do more of that. So well done, Dave.

A (29:01)

Although I like a good filet mignon, so I don't think we should completely do that at steak dinners.

B (29:05)

Yeah, I'm getting kind of hungry listening to Ian.

A (29:08)

Tom, let's talk about it. I mean, at least she didn't say the rubber chicken. Hopefully we've moved past rubber chicken these days, which is what people, you know, come eat the rubber chicken. But no, it's. It's so spot on. And, and it gets to the heart of what we've been talking about here, because, to be honest, it's like, don't pursue AI just because it is the hot topic or it's the, you know, the flavor of the month at every conference you go to there. First of all, there's a reason why. But be purposeful about it and be very strategic about where in my business can I create, especially if you're leaving the gate. It's a little bit like when we talk with advisors around channels of growth and you look at client referrals, COI referrals, do I want to do events, do I want to do digital marketing, do I want to do podcasts? You know, all these opportunities or ways, including M and A, to pursue growth. You don't have to be in all of those channels. Pick the two or three channels that you can really do extremely well. And I think AI is a little bit like that because there is a lot out there now. Some of it's bite sized and you can easily deploy it and get big wins in the business. And then others are going to require a little bit more of a true strategy, especially when it comes to thinking about what are the guardrails, what's the governance, what's our policies around it, making sure that our people use it appropriately within the business. So it's not without its challenges. But I do agree that the next generation of clients and the next generation of professionals that are coming into your business. I remember years ago, Fidelity did a think tank, a small study around what young professionals are looking at when they're considering advisory businesses. And this was, you know, several years ago. But even both young professionals, and I would say even their clients, they want to know that their advisor is leveraging technology, for example, they may not use it each day in their business. That's changed, of course. But they do want to know that advisory business are making investments in this technology. And I think there's a little bit of that in play. If prospective clients, for example, are not already asking or calling out where they observe AI in their experience, that's probably not that long before they do well.

B (30:58)

And I just want to share a story that happened to me a week ago that gave me really good perspective on where, you know, again, I think the future of our industry is. I was doing an annual review with a client of mine who retired from Facebook. Younger guy, 49 years old, really incredible engineer, helped run the open source side of Facebook. So, like, this guy knows AI, right? Like he's been using it for the last 10 plus years. Years. It was interesting because we were having this conversation of like, where I'm using AI, where the upside is, where the challenges are just kind of talking through it. And he made a comment that actually kind of stopped me in my tracks because he said, I'm glad you're using it as like a thought partner and to validate our plan, but at the end of the day, I would never want an AI as my advice. And I said, oh, why is that? He said, because I know how technology companies operate and an AI will never have a fiduciary duty to me and my family. You have a fiduciary duty to me and my family. You can use an AI to help you get to the decision points and run analysis and provide me different pieces of research. But at the end of the day, I know the buck stops with you. And if you violate that fiduciary duty duty, then you've got a lot of accountability on your end where a direct AI is never going to have that. And I thought that was a really interesting perspective.

C (32:24)

I couldn't agree with you more. I think advisors remain central, right? For empathy. You mentioned the key word, I think trust and judgment. AI won't replace advisors, but advisors using AI will replace advisors who aren't. I would go out on the limb and say that until we get to Super Intelligence AI 2027, I was going.

A (32:44)

To say that we'll reconvene in the future and see. So a little story along those lines. And then I want to pivot and kind of talk about the human factor. At the end of the day, as much as we're talking about technology, this is a human condition, so to speak, that we're ultimately talking about in the business. We had a longtime client reach out to us, had gone to ChatGPT and had asked it to turn out this beautiful newsletter article that they wanted to produce, talking about dimensional and premiums and all of the factors. And the output was gorgeous. And it was citing a paper that Marlena Lee had written. But he couldn't find the paper. And it made its way ultimately to Marlena's desk. And she's like, yeah, no, I never wrote that paper. You know, so that leads me to. I think what I think is an important part of this, which is as you, even as you're thinking about the future talent for your business. And that has to, in my experience, also include critical thinking. And that this idea that, you know, just as you've been talking about, it's a thought partner. But there has to be some willingness to apply some critical thinking. In my opinion, you both can push back on me if I've missed the mark on that. But that story reminded me that thankfully this advisor was deeply interested in sort of questioning, checking, sort of, you know, making sure that it made sense what he was getting from a really popular tool. And good thing he did, you know, in that sense. Dave, as you think about the impact of AI and how that's informed the skill sets you look for, the hiring you look for maybe even just straight up changes to certain roles in the business, what does that look like for you?

B (34:19)

One of the things that concerns me most about AI is is I've seen really intelligent people start to get lazy or complacent and just trust anything the AI says without actually applying some first principles thinking to try to challenge it. And so I think, you know, the reality of it is anyone on my team, I want to be kind of a person that's ability to think outside the box, apply some first principles, thinking they're the subject matter expert, not the AI. That's an important skill set. Just like if I had a room of humans around our board table, table, and I was chatting with them, some of them are going to have wrong opinions or misguided information. And it's like the job to discern this and figure out like, okay, where is the right line here? And I'll give you an example. Just in July, when the one big beautiful bill came out, we're huge into tax planning. I teach a national tax management course called the Tax Management Journey. And so that bill came out like a week before I was scheduled to teach this class to like a hundred advisors. And I was like, oh, this will be simple. Let me just upload the one big beautiful bill to ChatGPT and let me have it. Tell me all these points. And it was incredible how wrong it was. Like if a client actually followed the guidance that Chad GPT set around tax law, they'd probably go to jail for tax evasion. Like that's how bad and misguided it was. And the reason I was able to discern this is because I have that expertise. And I was like, that's not right. If you do this, you can't deduct that. If you have this income, you can't take this loss. And so it took me to be like, no, that's not right. And every time I'd say, no, that's not right, it'd be like, oh, you are correct, that isn't right. Thanks for catching that. And so I think people just need to get used to the fact that you are the expert. ChatGPT is like a super powered assistant to help you, but you still need to verify, validate and make sure the stuff you're pulling from there is real.

C (36:22)

I couldn't agree more. I think being LLM agnostic. Agnostic is also critically important. We've been talking a lot about GPT at Vast Advisor. We purposely chose Abacus AI to be the AI layer for our tooling for exactly this reason, to be LLN agnostic to not overly rely or become dependent on any one large language model. What Abacus has is a routing LLM and so it has integrations into deep seat, Gemini, Llama, GPT, 3, 4, 5 and it has a routing logic. So based on the questions that you're asking, it can come back with the right LLM to answer that question. And then you could also do deep agent research and you can actually have the different large language models check one another. That's another kind of approach that you could take in leveraging LLM as a partner in your business. I think from a hiring and org structure perspective, I think there are probably three things that we'll see happen. I think the junior roles will likely begin to shift to AI first. When you think of like a junior marketing assistant, they will become less and less necessary within the organization. And so I think that will shift to AI first. I think advisors need to upskill their own knowledge of large language models where AI is going beyond just prompt engineering. They need to understand how to leverage AI as a partner in their business. Because I don't think it's going anywhere. We're already seeing it play as we've already talked about an important role in the mid and back office in wealth. I think it's going to play an increasingly important role in the front office and I think you'll start to see new roles emerge within wealth. I think AI compliance officers will be potentially a new role. AI campaign managers will be a new role. And these are humans, right? Managing AI beyond just the integrated elements that it presents within workflows, but embracing AI tooling in various parts of the front, mid and back office, I could see that beginning to impact the org structure and present new positions within raas moving forward.

A (38:31)

So Ian, you have a very deep and broad awareness of a lot of the longstanding technology in the investment advisory space. And you know, one of the things that we're often talking to firms about is yes, there's some opportunity likely to maybe net new add to your tech stack, so to speak. But you hopefully if you've got a, and most firms do have a decent tech stack these days, those partners, those existing partners are likely pursuing introducing more purposeful AI like tools that you can take advantage of. This doesn't have to be an upending of your tech stack per se. Maybe that will happen in the future. So when you think about some of the existing technology in the industry and where AI is really maybe starting to move the needle, anything in particular, obviously it's maybe kind of easy to talk about CRMs, for example portfolio management systems, those are core to tech stacks and I don't think they're going to disappear overnight. But AI is certainly going to have an impact, I would think.

C (39:26)

Oh for sure. Again, I sold my life last wealthtech platform trulytics to envestnet. Okay, so you have the Envestnets and the Orions out there as massive tech platforms that kind of fit somewhere within that stack, specifically in the mid and back office. And Envestnet, their decision intelligence tools, they're processing 25 million next best actions a day on behalf of their advisors. And so applying AI to that is only making that more streamlined, more actionable and more impactful to the business. I think the big guys out there, the big players out there are playing a vital role in introducing AI, I think in very intelligent ways into the stack. And then you're going to have new up and coming startups. I mean that's kind of where I would fit Vast advisor in solving problems that have not been really focused on before. Like when you think about what drives organic growth and how does AI play a role in helping to transform the industry from using predominantly traditional Tactics, word of mouth, referral based marketing, event based marketing into, you know, kind of these systematic growth operating systems. And so that's new, that's net new, right? I mean, Kitchis talks about this. He did a deep study on SEO and at the, you know, one of the, one of his conclusions, like why isn't this industry more aggressively embracing digital first tactics? When you look at the lifetime customer value to CAC ratio, it would argue that they should be allocating more and more of their budgets to that, but it hasn't because it's, it's an industry that has looked at digital and probably increasingly AI as black box. And I think that's where you're going to see new innovation happen. New companies present themselves as net new to the tech sector.

A (41:17)

So a question for both of you and then Dave, I do want to, I think we'd be remiss if we didn't talk for a moment about AI policy and its impact on just the culture of a business. I want to talk with you a little bit about that. But before we do, do either of you have a conviction or a sense? I'm not going to ask you to pick the super bowl winner here. I'm going to ask you a harder, which is as a percentage of revenue, generally speaking, where do you believe organizations who are truly driving technology, driving AI forward in their businesses, what their spend rate needs to be? I can tell you from our study, it's hung out around three to three and a half percent as a percentage of revenue for I don't know how many years. And I don't know if that number should go up or needs to go up. But do you all have a sense when you're working with firms or even when you look at your own businesses, what you believe advisors should be spending on technology in general?

B (42:08)

Oh, it's so easy. The easy answer is they need to, they need to spend enough to get the job done and create an incredible productive experience and whatever that amount is.

A (42:19)

I feel like I. How did I know you were going to say that?

B (42:23)

Yeah, I mean, it's a really challenging question for obvious reasons. Just even going into the last conversation that you and Ian were having, having, you know, I know at our ria, like there's a couple big technology providers that like we're almost handcuffed too, right? And like we have to pay whatever their rate is to be able to leverage and use them. And some provide really great value to us. Others it's just like it's a cost of doing business type of thing, what I really envision is an area or a future where this technology actually brings our cost down. Good innovative technology should bring our costs down. And you know what I mean by that is there's certain technology providers today that we use that I couldn't even think about making a change from because it would be all hands on deck and it would be a huge effort to get our data transferred over and reporting and portfolio management and financial planning. And you go, the list goes on and on. So like for me, as I'm thinking offensively, two, three, five years ahead, how do we start controlling our own data today? That's the most important question for me as an advisory firm and kind of where we're starting to invest money is we're working with a company mile marker who does a good job in this space of trying to get all of our data back, creating our own data warehouse, bringing these data points in so that if it's two, three years from now, an AI and some sort of super intelligence overlay into it allows me to actually write my own software to be able to accomplish the job and the things that I need to do, we can seamlessly have it tap into our data and not feel like it's a six month or one year project to do a data migration from XYZ software to, you know, ABC Software. So that's a big area. I think as we look at the future, the, the daunting task today is knowing how much and where to spend money. I feel like it's something that can bring paralysis because of how fast everything's moving. You know, if I would have made a big investment six or eight months ago, some of these AI technologies, they're like obsolete today or there's a better, faster, more efficient version. And so I've always shared too with our team, sometimes patience is the best strategy. We don't need to go to the first provider in the market because as soon as that first provider catches Momentum, what happens? 20 VC companies fund 10 more companies to try to compete the same way. And that competition brings prices down. So it is really a game of chess as you think about how much and where to deploy capital today.

C (45:09)

I think, Dave, I think what becomes the defensible moat are those AI companies that understand the value proposition of the fine tuned models that can power the efficiency and efficacy of their tooling over time. Right. And so then it becomes harder to introduce competition because they're playing catch up. And so I think that's an interesting one. I think with respect, to respect to Kind of my worldview. On the marketing side, if you look at current marketing spend benchmarks, you see that RIAs will allocate somewhere between 2 to 5% of their revenue. To Dave's point, I think AI is a huge cost lever and I think it's going to represent massive savings to the RIAs that have leveraged. Like again, when you think of the lead brokers, I think leveraging AI to harness the same systems that those lead brokers have harnessed to date to generate leads for their firms, they'll end up paying 90% less. I think baseline RIAs, those under a billion in AUM, I think 1 to 2% of the revenue dedicated to like AI automations, that makes sense. I think growth focus RIAs will be somewhere between 3 to 4% and enterprises will be over 5. And I think that's what we'll see kind of in the near term. And I think those percentages will start to increase as AI presents itself more systemically embedded within the workflows in the front mid back offices of those RIAs.

A (46:35)

So one final question as we close out our time, I feel like we could talk for another hour or so but we'll leave it at this, we'll leave a little bit on the table so to speak, for maybe some future conversations and knowing that it might look a little different by next week. Right. The pace of change is pretty fast. But I'd love to just hear from both of you. You know, if you're an a business owner, an advisor, listening today, listening to this conversation and maybe there's some, we'll call it baseline AI that's in play in the business today already with regards to, to tech integration, note taking some of those things, but really does want to go like what's the next level so to speak. So Ian, you know, where do you consider sort of a really just rich, almost low hanging fruit opportunity for advisors that really want to, they want to raise that AI gain and they're ready to do that.

C (47:23)

Yeah, I mean again from my perspective, I mean if you're an advisor that is still relying on referrals to drive your business, you're going to quickly realize that that's not scalable. If you're buying leads, that's not predictable. And so identifying ways that AI can systematize that part of your business on the front office, lower those costs dramatically and build repeatable scalable growth systems. I think that's the low hanging fruit again from where I sit today because it's not been something that we've seen massive digital transformation AI presenting for the first time in an industry the ability to address that very systematically. And so I think that's some of the biggest low hanging fruit to drive growth in an industry where there's now capacity that can handle that growth. So to put a bookend on all of the efficiencies and the increased capacity that we talked at the beginning of the podcast, that's where I would bookend it at the end of the podcast. Great. What are you going to do with that capacity beyond spending more time with your clients? You can start to onboard new clients and generate net new growth, net new age for the firm that's not gated by having another body in the seat. Because now to Dave's point, he's getting 10x the productivity, just him as an advisor.

A (48:43)

Which the number one way that our firms who've told us their capacity constraint around growth are solving for that is they're hiring more bodies. And there's an element of that. But that can't be the only solution over time, you know, if you have to go hire a body for every iteration of growth you want to pursue, it's probably not sustainable or scalable. I'm also going to suggest us that leveraging these tools can help advisors get incredibly more intelligent and precise about the clients they can deliver the greatest value to. You know, we talk a lot about what is your ideal target client profile, what do you know about them, psychographics, demographics, all the behaviors that fall and all that. These tools I believe are helping advisors get just so much more precise around that so that you're not wasting time with clients that are not going to be an ideal fit for you. I hope that's my wish. Anyway, we do that. So Dave, how about you? When you, you know, if you're listening today, you're thinking, hey, I, you know, I'm, I'm ready. I want to, I want to see what I can do to sort of raise my game on this and really make an impact on my business. What would you say?

B (49:43)

Well, I'm going to use my capacity to start doing steak dinner seminars with, with Ian's motivation. So that sounds really fun. I've never, I've never done. That sounds, that sounds like a terrific idea.

A (49:55)

If it's at least a ribeye or New York or, you know, if it's a good, you know, it's good. We'll, don't worry about you do them.

B (50:03)

It's only at the Sizzlers that we got to bring the Sizzler back because we got to. We got to do them there well. So, you know, seriously, I think as I reflect on kind of my journey, right, like, everything comes down to productivity. We're in the service business and we're limited by hours in the day, right? So the more productive we can become, the better we can be to our clients, to our team members, to our business, to our partners. Partners. And so for me, you got to put a little bit of time, energy and effort into it. Just as one example, again, I mentioned chat GPT. I'm using that interchangeably for any LLM, pay a little bit of money and get the team's version or the version that doesn't publicly. Train on your intel and your information and then train it on everything about you. I mean, I have spent probably 20, 30, 40 hours trip training chat GPT on everything about me, my business, the way I think, the way I talk, the way I communicate. I've uploaded every podcast episode for our podcast, the Bucket Plan on Demand, the complete wealth management podcast. Like, it knows me, maybe almost as good as my wife at this point. So it really, really knows me and it understands my business. And the value of that is it can. It can be a better strategic thought partner to me. And sometimes I toggle on and off what I want it to learn publicly versus wanted to keep private. I've had three clients just in the last 30 days. When I do an introductory call with them, I say, where'd you find me? And they all said chatgpt or Claude. And these people all had $10 million or more of net worth. So these aren't like just a new kid out of college looking for investment help. These are ideal clients for most wealth management firms. So when I break down kind of the six ways that I think people can get started to harness AI to increase their productivity. The first one is using it as a strategic thinking partner. Anytime you need to think strategically, turn to AI as your partner. The second one is idea generation. Use AI to generate new ideas. Use it to create alternative solutions, to challenge your thinking, to narrow down a list of the most important ideas for you. The third is around decision making. Use it to help navigate the steps to make smarter decisions in less time. You know, again, talking about compressing time, sometimes we can get into decision paralysis. And so AI can really help create those steps. The fourth area is analysis. I kind of mentioned this earlier. Use its processing power to analyze content ideas. The fifth is content creating creation. We're in a content business. People want personalized content that speaks to them. So you can use it to help you brainstorm, draft first drafts and then you polish it because you're the expert. And then last but not least is researching, using it as a research assistant to help you gather organize information so you can take action. So I think as an advisor, whether I'm talking with my advisor hat on or whether I'm talking with my executive hat on, those are six things that I am confronted with every day. Strategic thinking, idea generation, decision making, analysis, content creation and research. And I've got a superpowered assistant to help me through all of those things.

A (53:29)

Well, and your number five is particularly stands out to me because we often equate this idea of if I want to deliver personalized service to my clients, I have to give up scale and efficiencies and sort of the behind the scenes elements. And I think both of you would agree with me, you don't have to. You can still deliver what clients will feel is a very curated, a very personalized experience. But this technology alone is a reason why you can also do that in a very scalable way, A very consistent way, consistent client experience. I love that you had that on your list as well. Gentlemen, thank you. I'm so thankful for just being willing to come and share your knowledge, share your insights. I know I'm even more excited about the impact of AI as we go forward. Thank you both for being thought leaders in this space within our industry. We are all the better for it and really appreciate your time today.

B (54:18)

Thanks Katherine. This was fun.

A (54:20)

So for those of you listening, you can absolutely find Dave and ian both on LinkedIn. You can check out VastAssembly AI with Ian and we've got Prosperity Capital and C2P with Dave Allison. You can absolutely find them out in the World Wide web. As we've been talking about today, do.

B (54:38)

We still refer to www.go to chatgpt or Claude? You can find a lot of information. Research assistant.

A (54:46)

I know, I was laughing as I was coming out of my mouth. I'm like, nope, we're not doing that. But anyway, you, there's great ways to find Ian and Dave and then as and certainly if you're interested in understanding how dimensional works with financial advisors, you can find us@dimensional.com maybe chat BT one day soon. We'll see with that. Thank you all very much and we will catch you next time.

D (55:07)

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