Episode 3.2 with Mike Floyd

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Text transcript 

Kevin Press: 

Welcome to the Canadian Advisor.cast, a podcast dedicated to financial advisors and the people who work with them. My name’s Kevin Press. I’m Editorial Director of Advisor.ca.  

My guest today is an old friend: Mike Floyd, CEO, Co-founder, and Senior Strategic Advisor of ThinkForces Advisory Group. Mike is a former director of product management at Morningstar, which he joined after it acquired the software firm he was with, PlanPlus Global.  

Welcome, Mike. Great to see you. 

Mike Floyd: 

Great to see you, Kevin. I enjoy the podcast. 

Kevin Press:  

Oh, thanks. Thanks so much. I mentioned your three most recent firms, but you’ve been in the financial services industry for decades, in tech and in marketing roles.  

Walk us through your career path. 

Mike Floyd:  

Sure. Well, as you can probably tell from the accent, my journey started in the UK in the banking world, and that evolved into banking and investment when I came to Canada and started with Scotiabank, came up through the branch banking stream like many financial advisors.  

And the role there that I last had was one of being in charge of the personal investment management sales force. And I grew that sales force, really from about less than 50 individuals up to almost 300 with a regional sales structure, et cetera.  

And while I was doing that, and it was very successful, selling a lot of the bank-dedicated product to investors. While I was doing that, I was looking for financial planning software to equip all of these individuals with, and one of the vendors that we were dealing with kept on telling me, “Come across to the dark side.” I did that in 2002, and I’ve spent the rest of my career, really, in what’s loosely termed as fintech, which covers off many different types of industries in there. 

And, working first for CGI, after an acquisition of Cognicase, leading the financial planning software group there; and the marketing group for Empower, which, I think, a lot of the advisors would be very familiar with. Then left that and joined a start-up, BlueRush digital media, where the focus was on video for marketing, for training, for being able to assist advisors in their conversations.  

And that journey left me back in 2018 exiting that company and joining another financial planning software company, PlanPlus Global, as you mentioned, where I was EVP, and running pretty much the company while the president and the chairman were looking to be acquired. 

That acquisition was successful in 2020 just as the pandemic hit, which was an interesting time. And working for Morningstar for about two and a half years, leading the enterprise financial planning software and looking at how we could integrate things like FinaMetrica risk analysis into the Morningstar platform, and then exited that company in 2022 and set up my own consulting business, met a like-minded individual-primarily from the insurance side of the business, rather than the investment side-and Paul Javadi and myself formed ThinkForces Advisory Group, or ThinkForces Advisory Inc., where we’re focused on being able to help firms, both large and small, both in the insurance, the banking, the credit unions, the investment, delivery side of the business, in assisting them with strategies that help them implement, and go to market with, digital transformation. And certainly the subject matter that we’re talking about today, AI, it’s on everyone’s lips. It’s the buzzword of the moment, and everyone wants some. It’s a very interesting subject. 

Kevin Press:  

At what point did you start hearing about AI and start to actually talk about how it was going to impact the industry? 

Mike Floyd:  

Yeah, well, I think, really, AI, and looking at how it’s come about and matured over the years, really the, I guess you’d call it the inflection point, was around the start of this decade, early in this decade, where people were talking about generative AI and how they would be able to implement it, what use would it be, what are the use cases, et cetera.  

And that’s really where we started to, I started to get involved, in terms of the thinking at Morningstar, and how can we do investment delivery, investment advice, insurance advice, interactions with clients, customers, members, whichever industry channel and financial services you’re from. How can it better apply to the actual interactions between the advisors and the end users, the clients? 

Kevin Press:  

You’ve spent so much of your career in this space where tech and finance connect. 

Mike Floyd:  

Yeah. 

Kevin Press:  

And the idea that financial companies-they’re all tech companies now. It’s just kind of a cliché. But, to actually see this up close, and to see the kind of step change that AI represented, talk about what that was like to witness firsthand. 

Mike Floyd:  

Sure. Well, I think, really, when you look at it, everyone is talking about AI these days and they see it as a technology change. It is, but it’s much more than that. It’s a business model change, an operational model. It impacts every piece of the business.  

Companies that are looking to implement AI, and specifically we’re talking about agentic AI these days, are really…they don’t necessarily have the appropriate business models that they’re thinking about, the transformational change in their business.  

And, there’s a fear of missing out, the FOMO syndrome, where, I’ve got to have me some of that; everyone’s implementing AI. But they don’t have the use cases that they need to consider to be able to change their business model through the application. It’s not just a technology project. And I appreciate what you’re saying about, everyone’s a tech company. For sure, there’s a lot of technology departments in a lot of the financial institutions, but this should be looked at very much as a business model transformation. 

Kevin Press:  

You know, when I think about the advisory business in particular, those use cases, they strike me as quite conservative. So, a lot of talk about note-taking, for example; meeting summaries; and that sort of thing. Are we seeing a sort of appropriate level of conservatism at this stage, do you think? Or do we need to maybe move a little more aggressively? 

Mike Floyd:  

Definitely, my opinion is that we should move more, they should move more aggressively. And the reason for that is, when you compare, I think we were looking at Wealthsimple, and are they more prepared to be able to implement AI than other institutions, the fintech companies? Are the fintech companies able to implement more quickly? Yes, they can. But, really, the value, when you’re talking about this in the context of the advisor relationships, it’s really looking at how AI can move the advisor up the value chain.  

A lot of these tasks that we’re looking at are probably, I don’t know if mundane is the appropriate terminology, but tasks that can be performed more efficiently in there. And when we talk about efficiently, there’s always the fear of, well, this is going to be displacement of people, of roles, of the human aspect. This is not the case. This is should not be the case. The value from the advisor is in the empathy they bring, the expertise they bring, the experience, and the ability to provide advice, with confidence, to their clients. 

Kevin Press:  

When we talk about Wealthsimple and other-what we used to call robo-advisors-we talked about them in fairly dismissive tones in their early days. They’re really much more than that now, aren’t they? And AI is increasingly being leveraged in organizations like that to pull ahead. 

Mike Floyd:  

Yes, absolutely. I mean, and the advantage that they have is the speed to market. The disadvantage that they have is the relationships that advisors have built. And that’s really where, when we’re talking about business models and being able to place the advisor up the value chain, it’s assisting.  

Don’t think that it’s a replacement. This is essentially AI copilot. This is providing assistance to the advisor to be able to allow them to deepen the relationships that they have with clients. Be more proactive. When you look at marketing and marketing campaigns, we’re all very familiar with those, you’ll see those lessen over time, and it’s going to be more of a continuous relationship between the advisor and the client in terms of being able to interpret what is being provided through the use of AI, more speed in preparing financial plans, monitoring, that type of thing. The advisor is going to be one of interpreter and be able to translate and help the client make decisions. You’ll see much more sort of on the life-stage advice scenarios from advisors than probably in the past. 

Kevin Press:  

You used an important word, there: “continuous.” Tell us more about what that looks like. 

Mike Floyd:  

Sure, well, in marketing plans, typically what happens is, you know, you plan for a campaign to be launched at a certain time, such as the RSP campaign, or particularly the new products that are coming to market. That is going to very much more sort of lessen, and the advisors are going to be much more in control through the ability of AI to help them, very much sort of personalize.  

Typically, you look at personas and segmentation in marketing and where you’re going to target. The ability of AI to provide to the advisor a much more meaningful personalized plan for approaching an individual client, it’s going to be marketing campaigns one-on-one, but it’s going to be not seasonal. It’s going to be continuous; it’s going to be event-driven life events of the client. It’s going to be, what’s happening in the market? Are there new products that are coming out?  

And, one of the things I would mention is something like the tokenization of assets, which is on the forefront coming into play, just being talked about now, but that’s going to play much more of a role in the availability of different investments that an investor is going to be able to go into. It’s going to play much more of a role in decisions around what insurance policies are appropriate for a particular client, when to look at those, in terms of, it’s not just a five-year anniversary, it’s a life event type of driven model. So that it’s going to be very much more a personalized relationship between the advisor and that end client, the person who’s looking for the advice and the assistance. 

Kevin Press:  

And does that mean a broader scope within the relationship, beyond the traditional sort of retirement planning and other long-term financial planning? 

Mike Floyd:  

Sorry. 

Kevin Press:  

And, if so, how much does AI facilitate that? 

Mike Floyd:  

A lot, really. And one of the challenges is that a lot of financial institutions are very siloed in their aspects: the lending side, the mortgages, as well as the general banking, separate from the investments. Everything’s being done in silos, and that’s sort of very traditional.  

What you’re looking at, and I think one of the things that’s going to come more and more to the forefront, is when projects are looking at being able to implement AI in a particular area, what is needed is the strategy on how does this all play together? You’re going to see more AI playing an oversight role in there, in that you’re looking at being able to have a master AI that is then able to come in and say, well, this is happening on the investment side, this is happening on the lending side.  

What is the best outcome for the client in here? And that information then will get passed on to the advisor to talk about, to be able to interpret what is being provided through the AI in the financial plan. And I’m talking about holistic financial plans, fully comprehensive, considering all aspects-not just the investment and the insurance side-but all aspects of the financial well-being of that client. 

Kevin Press:  

So you see it remaining within the finance world, but being beyond seg funds, mutual funds, ETFs, that sort of thing. 

Mike Floyd:  

Yes, absolutely. Yeah, and, really, when you look at, as a former, or “FP Retired” as I’m now called, rather than a CFP, it’s always the holistic approach that you’re trying to take to the client’s finances. But a lot of the firms, invariably-out of necessity, out of desire for revenue streams, for being able to successfully grow their business-tend to look in silos at different elements of that financial well-being. Be it, as you mentioned, the different types of investments. It has to be brought together to look at everything. What is being borrowed? Are there mortgages? What type of business is the client in? Are they self-employed? Are they a decision-maker in an organization? Are they middle management? Are they just starting out? All of these things can be looked at through AI. And so the segment becomes a segment of one, in there. You’re looking at the individual client and the life stages that they’re going through. 

Kevin Press:  

So tell us more about that. What will it be like to be a client in five years from now? 

Mike Floyd:  

Well, I think that, essentially, the client expectations are rising, and that’s through all segments. The one area that the AI will help a lot is the mass market. They’ll be able to receive good advice from the AI-structured, the robo-advisors, if we like, the enhanced future on the advice delivery side.  

But, also, as they grow into “I want more support in my decisions I’m making financially,” they will look for the human aspect, just as they do today, because we really had a lot of the robo-advisor availability for some time now.  

So it’s less changing that, but it’s more on the advisors being able to grow their book of business through being able to efficiently serve more clients, serve clients better. There’ll be a whole pricing model that is changed on the delivery advice, as well, that accompanies that.  

And, really, the challenges for the traditional investment firms, the distributors, where they’re looking at the advisors and the commissions that are paid, et cetera, I think we’re going to move much more away from that type of model to one for the subscription model, where clients will pay for advice through a subscription model. They’ll be tiered based upon the portfolios, the assets under management, et cetera, in there. And, it will be a change in mindset for a number of advisors to be able to look at how they employ, how they’re being presented with the tools to be able to address the client needs there, how it’s able to assist them in deepening the relationships that they have with those clients. 

Kevin Press:  

You mentioned there how this needs to change the perspective of advisors. What about firm executives? How will this… 

Mike Floyd:  

Absolutely. 

Kevin Press: 

…allow them, or even require them, to think about the business differently? 

Mike Floyd:  

In many different ways. They’ve got to look at the businesses. Those executives in the traditional firms that are looking at simply overlaying AI on top as it becomes a technology project again, are really going to sort of miss out, and their strategy, what AI does, it amplifies the strategy that is in place.  

And, by that I mean, if it’s a good strategy, it will help them succeed. If it’s a bad strategy, if they’re not looking at how they change their business model for the delivery advice, then they will struggle. 

Kevin Press:  

Will it allow them to serve clients with lower levels of investable assets? 

Mike Floyd:  

Absolutely. I mean, I was mentioning earlier just about the mass market. And, where clients are looking for advice, as well as the ability to do some elements self-directed, it will be able to be a hybrid model, often referred to as the AI Centaur model.  

And by that, I’m sure many are familiar with what a centaur is: It’s half-horse, half-human, et cetera, in there. That model is being used as the hybrid model to be able to serve clients better.  

So it could be that what we will see is, for the mass market, as they increase through their financial journey in the amount of financial capability that they’ve got, the amount of investments they’ve got, the amount of the insurance need that they have, that they will progress more into the need for direct human-in-the-loop financial advice, the interpretation of what this means, the exploration of possibilities.  

And that’s something that, really, in isolation, yes, the implementation of AI can enhance the robo model, but also it can lead to predictive modelling, which allows the advisors to come and join that journey when the client needs are appropriate and grow them into very profitable relationships. 

Kevin Press:  

It’s striking to listen to you, Mike, because, frankly, the vision that you’re describing here, I’m not hearing it from industry participants-at least not yet. How concerned are you about the industry’s ability to pivot here? 

Mike Floyd:  

For the larger institutions, it’s a struggle. And, when you look at the way that their technology is developed, there’s, we talk a lot about the legacy technologies and the challenges that a lot of the financial institutions have had in looking at how they’ve modernized those.  

And, often, there’s a layering of new technologies on the old technologies, and it’s a bit like a ball of elastic bands, rubber bands, where you keep on layering things over and over, and at some point, it’s not functioning at its optimal level. It’s got to be rethinking of what is the business model, the operating model for that business if you were starting it today, that, ideally, you would like to take it to. And that should be the guide. It’s not going to be possible for everyone.  

One example is the storage of data. Data, when we’re talking about AI, is king. It’s the backbone of how AI operates, and it’s only as good as the data [that] is available. And when we look at the silos of data, how it’s stored in larger financial institutions, that’s an issue. Moving towards something like a data lake-as it’s termed in the industry, where all data is stored in a central location-is almost obligatory in terms of being able to set up the basis for progression, in there. It’s not impossible with the siloed model, but it just makes it more challenging.  

The large financial services companies really have to look at, are they willing, not to just implement technology, but to change their business model so that they’re placed appropriately for success, that they’re able to take advantage of the application of AI in the relationship with the client. It’s not just a back-end system anymore; it’s the front-end experience. Be that human-in-the-loop or be it just through something like a robo-advisor, how can you best employ that to satisfy the need from the client? 

Kevin Press:  

That’s the advantage, the sort of core advantage that fintechs have had in recent years, right? That they’re not burdened by all of that legacy technology. And I think if Canadians understood how much of IT, financial IT infrastructure dates back 50, 60 years, they’d be shocked. 

Mike Floyd:  

Yeah, absolutely. Yeah, and with the advent of cloud and being able to look at how data is stored, how data is manipulated, how data is used to train AI, it becomes a critical point in being able to succeed going forward. You’ve got to look at the foundation of what you’re trying to implement with AI. 

Kevin Press:  

Yeah, and that was my next question. Is this such a step change that it really will require chief information officers to go deep and really start to invest in core infrastructure in a way that they haven’t in the past? In other words, versus just sort of bolting on improved customer experiences. 

Mike Floyd:  

Yeah, absolutely. And it’s not just the CIO, it’s also-as you were mentioning earlier-is it a challenge for the boards of these financial institutions, for the senior management to be able to adopt it? It is a challenge, because it requires a radical change in mindset in how business is done, what is delivered, how advice is delivered through to the end client. And relying upon the old business models, or trying to maintain momentum under an old business model, is going to be fraught with risk. It’s going to be very much a challenge. If they don’t do this right, then they’ll progressively lose ground against the, both the new challenges, but also against those institutions that are successful in implementing AI with the customer first, with the advisor playing a strong role, a deeper role in that relationship in order to be able to meet the expectations.  

Client experience is really one of the key elements here. It’s going to look much more like the Netflix, Amazon, ChatGPT type of world, when the clients look at how they expect advice to be delivered through them. I don’t mean that in terms of the model on how they actually receive the advice. It’s not going to be movies and all this sort of stuff- although some may like that-but think about more on Netflix and Blockbuster. Blockbuster were experts at delivering videos to clients, but they got the model wrong. When advances in technology enabled Netflix to be able to look at the new delivery model, Blockbuster weren’t able to adjust. The senior management didn’t see the writing on the wall, and we all know the story there with the unfortunate failure of Blockbuster over time. 

Kevin Press:  

Yeah, it really is. The term I’m hearing more and more is, its operating system. It’s the way your organization does business. 

Mike Floyd:  

Yes, absolutely. Yeah, and so, when I talk about operating model, business model, it impacts every aspect. When we’re out delivering advice on strategy, we start by indicating it’s not just a technology project. This is going to impact HR, learning, how you do your accounting, how you deliver it, where you deliver, the different contact points that you have with clients, the frequency of contact that you have with clients.  

There’s going to be a whole training that is going to be needed, not just down at the lower levels- where the client and the advisor speak, which is the most important point of contact-but also the senior management. They need to have an ability to recognize that they need to change their business model; they need to have the resources and be able to accept that they’re going to have to do this with speed to be able to maintain their position or even grow further in the future. 

Kevin Press:  

What will a day in the life of an advisor look like in five years? 

Mike Floyd:  

I think, when we talk about role changes, you look at the advisor, and what they’re doing, and how they’re supported. There’s a lot of tools that they currently have. Those tools are going to become much more integrated. When we’re talking about agentic AI-and by that we’re referring to distinct from generative AI or AI as people think about it today- generative AI, a better name for it is autonomous, in there. And sometimes that brings fear to people. It’s doing things there which I don’t know about. That’s not how it’s going to be implemented or operate. It is going to certainly help with preparation of financial plans, almost instantly based upon information, updating financial plans, et cetera.  

The role of the-what’s referred to sometimes as marketing assistant, but the assistant to the advisor in assisting to build plans, et cetera- that role is going to lessen somewhat. This will be an advantage to the single advisors, the small firm advisory groups that are out there, in that they’ll be able to move that advisor up the value chain, because a lot of those initial tasks are going to be done through AI and the application of AI tools.  

They will be able to see; they will get information where they should be interacting with the client- not just on an annual review or contact every six months, et cetera, to do a short review-but more into being able to do spontaneous, based upon information they’re provided with through the AI-contact with the client to guide them through some pitfalls, maybe, that are appearing, some challenges that a client may be facing, in there.  

And the client’s going to be able to interact much more with the advisor through, essentially like a chat facility, in there. Chatbots, that’s too simplistic. The advisor is going to be able to use an AI copilot to help them manage the relationship with the client so that the client feels that they’re, in fact, getting better information from the advisor, that the advisor is much more aware of what’s going on in their life. The client’s going to be able to input information, new information, snippets of information, review performance, question the advisor a lot more easily, and the advisor’s going to be able to respond- either directly, having an in-person meeting or a video conference call is favoured by many these days- to be able to guide and interact and coach the client. 

Kevin Press:  

You alluded to how this new technology may impact employment levels. Do you think there’ll be more financial advisors in 10 years or fewer? 

Mike Floyd:  

Depends what level. The ones that are successful in the relationship side, and certainly at the higher end of the wealth market, will probably be more successful. They’ll be able to manage more clients, et cetera. I think when we’re looking at the changes in roles, again, those that are in the preparatory, making financial plans, inputting information, et cetera, their role is likely to be pushed upwards.  

So, it depends on which firm you’re working for, who is adopting AI to improve this. Firms will grow who successfully implement the AI Centaur model, where there’s a hybrid in there. Firms will also succeed in competing against the robos, where they’re doing similar to be able to handle the clients who aren’t as far along in their financial journey. And so, you will see some firms expand. You’ll see new roles created growing out of the application of AI.  

Governance is going to be much more strong in the future. When you look at the environment, the regulatory environment, and what’s required, there is going to be more expectation for transparency, for accuracy. The liability doesn’t go away; you’re not relying just upon an AI model. The advisor at the end is still ultimately responsible. So the advisors will have to have an understanding of how these models work, and much more being able to interpret what the outputs are so that the regulators on the governance side can be satisfied that the advisor is still in the loop and being able to do what’s expected in protecting client interests, in there. So I would say, overall, you might see some replacement of roles in the lower level, preparatory type of roles within an investment firm, or an insurance firm, and much more emphasis on those that can build successful relationships at the higher end. 

Kevin Press:  

Do you think that financial services companies will realize efficiencies having to do with head count? Like it seems to me there’s an awful lot of expectation built into even share prices these days that these companies will be able to get leaner. 

Mike Floyd:  

Yeah. I think that’s the wrong way of looking at it, quite honestly. I think that the… and by that, I mean, the firms that look at simply implementing AI for efficiency, they’re looking at cost savings to lower the head count, and that’s an intentional sort of direction that they could be taking, in there.  

My belief, it’s the wrong direction, and that it really takes…back to the changing the business model. If this is done right by a firm, and done with reasonable haste, then they will be able to be successful and actually grow their business. That doesn’t mean that they’re laying off people or cutting the overall head count. They may, in fact, be growing it, because if they take advantage of what’s happening in the marketplace, they will be able to be on that leading edge in delivering the human-in-the-loop, the Centaur model advisory model out there, and be able to actually grow their business, because they’re recognized as being empathetic to the clients, being well informed, being able to understand what the client’s needs are much more proactively and continuously than they can today.  

The old business model will slowly fade, and that’s simply because the ability of the company that adopts this successfully, they’re going to be much more successful at building those relationships. 

Kevin Press:  

Is that really the principal risk, when we talk about AI’s evolution in financial services, and then, more specifically, among the wealth management firms? Is that the great risk that they’ll see this as an efficiency play? 

Mike Floyd:  

Yes, I think that is one of the largest risks. There’s also, let’s be honest, with AI, it’s still relatively early days, so some of these issues will be overcome. One of the reasons that the human-in-the-loop is so important is because AI, in its current state, is only as good as the data that it’s fed, the training that it receives, in there, and you’ve probably heard about AI hallucinating, and this is based upon, essentially-hallucinating means it’s giving the wrong information or it’s making up information and presenting it as true and verifiable, et cetera.  

You’ll see, as the training and the data become better, through the amalgamation of information into a data lake or similar, then you’ll see that the hallucinations will become less; the accuracy will increase. People will have confidence in what is being prepared by AI much more. It’ll be accepted as part of the way of life. AI, generative AI in particular, agentic AI in particular, is going to be permeating every level of our lives however it’s used.  

It’s much like when electricity was first introduced. People were slow to move; cost was high. Costs are going to come down on the implementation of AI and you’ll see industries transform, outside of the financial services industry. Just like installing a data centre to deal with AI, building it from the ground up.  

You’ve heard about the costs on the NVIDIA chips and how much it costs to set up a data centre, and it’s $40,000 a chip, and that’s declining. Things like building solar farms around data centres, because they use a massive amount of energy, so that they can be supported in a clean way with the electricity demands that they have.  

There’s going to be so many developments and changes in how we live as a whole that, if you try and preserve traditional business models, you are going to drop behind, and you’re going to struggle, and it may be too late once you’ve woken up, in there, because others that have had a little more foresight are going to be that much further ahead in terms of timing. 

Kevin Press:  

Big question to wrap up, Mike. Net positive effect do you expect from AI, or do you think more balanced, some positive, some negative? 

Mike Floyd:  

I think the positives, essentially, are that there will be better relationships between advisors and their clients. Clients will be more successful because AI will be able to introduce to the advisor a better way of looking at things, more information, more timely information, and be able to support that relationship building. It’s still down to the human. It’s still down to the advisor to be able to use their abilities to develop those relationships over time, to grow the relationships.  

When you look at things like group services, whether it’s insurance or retirement services, et cetera, typically the people within those groups get very little advice, I would say, on an individual basis. You’re going to see much more personalized advice being able to be provided there.  

It will allow advisors to pick those clients that are best to work on. So that’s essentially a growth area for them, where they’re able to farm the clients out of group plans and turn them into really successful individual clients, both for them and for the client.  

Those clients need advice; they demand advice. I think the risks here are the speed of adoption. Yes, there’s a fear of missing out. There is a risk of layering on AI simply as a technology project. It’s not. It’s a business transformation project. And being able to look at that holistically from the company level, that it’s going to impact every part of the business there. That there’s going to be a need for improved data from the company on the whole picture of what that client’s needs are financially. That if they don’t start taking a mindset where they’ve got to look at the complete picture, then they risk continuing looking at the siloed approach, and that model won’t work anymore in the future. 

Kevin Press:  

So good to have you on, Mike. Thank you for this. 

Mike Floyd:  

You’re welcome. Been my pleasure to talk with you. Great talking with you, Kevin. 

Kevin Press:  

My guest has been Mike Floyd. Visit ThinkForces.com. Canadian Advisor.cast is a production of Newcom Media. It’s produced by Alisha Hiyate. Noushin Ziafati is our associate producer. My name’s Kevin Press. Thanks for being with us.