AI tools that find answers, suggest tax strategies and draft emails for you

Financial advisors and tax professionals wondering how artificial intelligence can help them may consider the concept of a quality chess player who uses technology to beat a grandmaster.

"If my tools allow me to go into detail and give me good guidance in particular areas, that kind of means that I have to be a generalist in using tools to be successful," said Dean Sonderegger, senior vice president and general manager of tax and accounting at global accounting, information and software firm Wolters Kluwer. "That's an interesting evolution that we see in the knowledge professions as they move forward. … A very good chess player who augments their ability with the tool all of a sudden augments their ability to succeed."

In other words, the wealth and tax professionals who leverage AI well may resemble an updated, undefeated version of Deep Blue, the IBM computer that lost its initial match to world champion Garry Kasparov in 1996 then won a rematch a year later. As fintech firms work toward developing more AI tax preparation tools, other emerging solutions assist professionals in either field seeking to enhance their services for clients by optimizing investment portfolios for savings and proposing planning methods that reduce payments to Uncle Sam. 

There is currently "a huge gap" because "tax is something that is truly ignored by financial advisors" who "think it's the CPAs' problem," said Sindhu Joseph, CEO of AI wealthtech firm CogniCor.

"For the financial advisors, they are not aware," she said in an interview. "They don't have enough context and data at their fingertips, and this is something that is ignored or goes sideways many of the times. Everything has to be taken into consideration throughout the year."

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Just as studies have revealed mixed views of AI among tax professionals, advisors display limited trust in AI tools, even though companies are using technology to give practitioners an edge in tax-optimized investments with developments such as automated rebalancing of portfolios. 

Earlier this month, Wolters Kluwer launched an AI Center, where large wealth management firms, small practitioners and other clients can find the company's five primary applications. Developed and enhanced over the past decade, these applications now account for half of its digital revenue. The services include "CCH AnswerConnect," which provides answers to advisors or tax professionals using a proprietary database of 6 million documents related to state, federal or international laws, Sonderegger noted. 

For example, the tool can collaborate with advisors to figure out whether two real estate properties are eligible for a like-kind exchange, estimate the tax impact for couples considering whether to file jointly or separately or, in the event of a divorce, lay out the ramifications, he said. And after the tool performs the calculation, it can then create a message to clients explaining the strategic choices. The "fun of this idea" is that it "dramatically improves the ability of practitioners" without requiring them "to go through a boatload of research," Sonderegger said.

"If you look at the history of knowledge, it basically is, how do I search and find through a general-purpose document what's relevant to me. As a professional, I then have to do some labor to match with my clients' facts and circumstances," he said. "It's an efficiency boost, if you will, to get to that point where something is more actionable."

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Other tools take a similar approach in trying to help advisors and tax professionals do their work faster by removing manual processes and suggesting approaches for clients. 

A module called Client IQ in CogniCor's Advisor Copilot — a part of the firm's digital assistant for wealth management and insurance companies that deploy OpenAI through Microsoft's application programming interface — uses data from an advisory practice's customer relationship management software, client meeting notes and email messages to propose action items for discussion, Joseph said. The system would note, for instance, that a client isn't maxing out their individual retirement account or that they may consider opening a health savings account. Another module can email a client in order to set up a call about the topic.

"We would take all of the clients' specific data and then provide a few strategies which have not been implemented," Joseph said. "We are saying that, for this client household, these are the things that you should look at."

For the future, CogniCor is working toward including tax returns as part of the data and accompanying suggestions. At Wolters Kluwer, the firm is developing methods that could "make you more successful as a professional" by enabling them to "make educated decisions around where you spend your time" by assigning a type of a score distinguishing between "good clients and not-so-great clients," Sonderegger noted.

"There's a general distrust of AI and probably a healthy distrust of AI," he said. "The way you address that is you ground the tool in a set of content that is not the internet but is a very highly curated set of content."