Hyper-Personalization in Financial Advice: A New Era of Client Engagement Has Arrived

Financial advisors have long understood the importance of creating personalized client experiences. In the 1980’s and 1990’s, the relatively basic technologies of the day facilitated only broad client segmentation strategies. Factors like net worth, age, and risk tolerance helped delineate client archetypes, allowing advisors to customize products and services for distinct groups. By the early 2000’s, the advent of customer relationship management (CRM) systems and financial planning software allowed advisors to create much more nuanced profiles of their clients. Individual investment preferences could be easily stored, important life events like birthdays and anniversaries automatically remembered, and pathways towards specific financial goals clearly mapped out. With sufficient time and effort, exceptional advisors were able to leverage these new tools to greatly improve upon their client personalization capabilities.

However, recent advances in artificial intelligence (AI) and machine learning (ML) are once again altering the quest for personalization in financial advice. These new technologies have created the possibility of intelligently leveraging vast amounts of client data to provide highly individualized advice — to every client. One recent WealthManagement.com headline boldly proclaimed that “Personalization at Scale is Here.” Indeed, leading advisory firms are making strenuous efforts and major investments in integrating AI and predictive analytics into their practices, with the aim of creating a hyper-personalized client experiences that significantly strengthen trust and satisfaction.

What is Hyper-Personalization in Financial Advice?

 To get a sense of the potential of hyper-personalization in financial services, it helps to get a sense of what the term means generally speaking. Spotify, one of the major streaming music services, offers users curated playlist suggestions based on individual listening histories and an annual "Wrapped" feature delivers a unique, customized year-in-review for millions of users. Amazon, also a leader in hyper-personalization, meticulously collects data on each user's browsing behavior, discerning their preferences and dislikes. This information is then used to generate a customized, continuously updated homepage that markets products matched to recent purchases and browsing patterns.

 State of the art hyper-personalization of this sort is built on real-time data collection, artificial intelligence, and predictive analytics. Rather than the broad segmentation strategies of earlier times, or the labor-intensive personalization approaches enabled by CRM systems, hyper-personalization empowers marketers, service providers, and sales departments to react intelligently and automatically to a customer’s changing behaviors and unique circumstances. For example, getting a new job, a change of residency, or getting married have fundamental ramifications for what a customer is likely interested in and how they may be feeling. As long as these changes are turned into data, either through direct user inputs, or third-party aggregators, they can be used as a catalyst for hyper-personalized marketing or relationship building.

 Because of the importance and personal nature of receiving financial advice, the use case for hyper-personalization for financial advisors is particularly compelling. After all, financial advisors have access to and grapple with sensitive, complex information that includes a client’s financial assets, long-term financial and lifestyle goals, individual risk tolerances, and family dynamics. They are also often privy to events such as inheritances, retirements, or professional milestones. The potential of hyper-personalization in the financial advice field, therefore, goes beyond just customizing investment and wealth management recommendations. It also promises intelligent monitoring of unfolding events in the client’s life — alerting advisors of opportunities to proactively offer guidance that feels deeply relevant and timely.

 For example, a well-designed hyper-personalized system may analyze payroll deposits for sudden wage increases, a new payroll provider, changes in contributions to retirement accounts, or sudden increases in HSA contributions — all of which could be signaling a new employer or significant promotion. Additionally, many hyper-personalization interfaces encourage clients to update life events directly through client portals. Advisors can then be automatically alerted, allowing them to adjust financial recommendations accordingly.

 If a client is promoted or changes jobs, a hyper-personalization system can alert advisors to consider recommending adjustments to tax strategies or long-term investment plans to reflect new income levels or benefits. Likewise, if a client is nearing retirement, but holds a large proportion of high-risk assets, hyper-personalization platforms could prompt the advisor to make a timely suggestion about reallocating funds to more stable investments.

 The key to all of this is that hyper-personalization, if fully realized, offers a quantum leap in delivering highly customized advice — without adding significant manual effort to an advisor’s workload. Becoming aware of changing circumstances and devising appropriate strategy adjustments for individual clients need not take hours of proactive data analysis and situational planning. Rather, advanced AI and predictive analytics will constantly monitor client data in the background, automatically presenting insights and recommendations for engagement and action. Ideally, this will super-charge the advisor’s to build meaningful, long-lasting client relationships.

Where it stops nobody knows

 It is clear that the hyper-personalization genie is out of the bottle, and the financial advice industry is investing heavily in the technological infrastructure necessary for continued innovations. For example, Morgan Stanley Wealth Management (MSWM) is pursuing hyper-personalization capacity through a strategic partnership with OpenAI, making it one of the first adopters of GPT-4 in the wealth management space. This partnership builds on MSWM's pre-existing innovations, such as the Next Best Action engine, which delivers tailored client messages, and the Genome capability, which personalizes communication through data analytics and machine learning. According to MSWM leadership, these technologies are truly transformative, enabling advisors to access firm-wide expertise instantly, and freeing up more time to deepen client relationships and provide high-value guidance.

 Ironically, the current rapid pace of technological development poses a risk for advisors and firms interested in leveraging hyper-personalization technology. With continual advances in AI and machine learning, there is a real possibility that today’s “best-in-class” hyper-personalization tools could be outdated within months. Another risk is that the complex data frameworks required for hyper-personalization will undoubtedly make data security and privacy challenging — particularly as more third-party integrations are introduced to enhance hyper-personalization capabilities. Finally, it is crucial to remember that human judgment is central to providing emotionally intelligent, high-quality financial advice. Real-time recommendations derived from algorithms may not always be in true alignment with a client’s emotional state of mind or the complexity of their life.

 Still, one recent estimate calculated that the global market for hyper-personalization systems was valued at approximately $19.37 billion in 2024 and is projected to grow at a CAGR of 15.83%, reaching about $72.69 billion by 2033. Relatedly, the AI for banking market is expected to grow from $46 billion in 2023 to around $277 billion by 2033. In the fintech sector, 18% of capital investment in 2023 was directed towards personalized financial management solutions. This suggests that financial advisors who work to understand the upside of these technologies, and learn to judiciously leverage them, will position themselves to provide superior client experiences and build stronger, more enduring relationships.

Take your expertise in client engagement to the next level. With the Certified Private Wealth Advisor® (CPWA®) certification, you'll master the advanced knowledge and techniques required to deliver hyper-personalized, value-driven advice to your most sophisticated clients. Learn more about how the CPWA® can empower you to stay ahead in an evolving industry.