AI in Wealth Management: How Technology Is Reshaping the Future of the Industry

Why AI Matters to Wealth Management Firms

In financial services, as with most other industries, technology has been a persistent board-level topic for the whole of the 2000s. It now shapes strategy, proposition, risk management, compliance while consuming an increasingly large proportion of operating costs and investment budgets.

Technology’s importance looks set to increase exponentially now that AI has landed in the consciousness and everyday activities of the general population. Consumers now have access to information, reasoning, options and suggestions instantly across almost every subject.

Having been largely silent about consumers making decisions based on ideas sourced from money-saving experts, newspapers and search engines, some industry professionals and regulators are now debating the risks of consumers using AI to support financial decisions.

The real question, however, is not whether consumers should use AI for financial decisions. It is how the industry responds so that its own AI-enabled services become the first choice for consumers. For wealth management firms, the time for procrastination and proof of concepts has largely passed. The focus now should be on strategically deploying AI to maximise future opportunities and protect against the risk of long-term irrelevance.

This article introduces some of the key areas AI is likely to impact across wealth management and provides our perspective on the opportunities this technology presents.

What Is AI in Wealth Management?

Artificial intelligence in wealth management refers to the use of AI technologies to support investment analysis, client servicing, financial planning, operational processes and business decision-making.

Unlike traditional technology, AI moves beyond storing information and managing workflows to actively generating insights and supporting actions.

Yesterday’s WealthTech: Support not Smart

Systems of Record Rather Than Systems of Intelligence

Almost every role in the industry starts the day by turning on a device and ends the day turning off a device. Despite decades of ‘digitisation’, most wealth-tech remains a simple combination of systems of record and workflow rather than systems of intelligence. Yes, data is more accessible, processes are more auditable, and collaboration is easier, but humans are still required to perform the majority of operational and advisory tasks, with technology largely acting as an enabler rather than an active participant.

The Limits of Digitisation

The much-vaulted digitisation of the industry did remarkably little to change that reality. Some tasks may have changed hands, some collaborations made smoother, but the overall result was underwhelming. (We will explore the impact of digitisation and the evolving client experience in future thought leadership.)

Today’s AI: Smarter Support and Getting Smarter

From Support Technology to Intelligent Technology

AI turns the role of technology within the sector on its head. Even today’s AI functionality, which we will look back on as rudimentary in a few years, is capable of performing over 70% of the day-to-day tasks within the wealth management industry and given the rate of change we expect the capability to exceed 80% within the next 18-24 months and continue to increase as systems evolve.

Existential Crisis or Once in a Lifetime Opportunity

The Risk of Standing Still

It’s definitely a crisis for those convinced that what they have done for the last 15-20 years is what they will do for the next. Firms that continue to view technology simply as a support function risk finding themselves increasingly disconnected from changing consumer expectations and AI-enabled competitors.

The Opportunity for Growth

For those firms willing to adopt from the very back of the back office through the business all the way to the client, including rethinking the types of clients they serve, this new technology, combined with an evolving regulatory landscape and changing demographic trends, creates a once-in-a-lifetime opportunity. As explored in our whitepaper Wealth Management Truths, Complications & The Long-Term Potential, technological change rarely happens in isolation. The firms that understand the broader forces shaping the industry will be best positioned to respond to them.

Potential benefits include:

• Growing assets and revenues
• Serving more clients at a lower cost
• Increasing organisational capacity
• Improving operational efficiency
• Enhancing profitability and business value

Exactly how AI creates those opportunities, and the implications for firms that fail to adapt, are themes we will continue to explore through our future thought leadership and research.

The Future of Wealth Management

Wealth Management has underinvested in technology over the last two decades, and where it has invested, it has tended to be in core infrastructure rather than optimisation and innovation. AI has the potential to be fundamentally different. Being a solution to both Artificial intelligence introduces the possibility of technology becoming an active participant in operations, analysis, decision-making and service delivery rather than simply playing the role of record keeper.

Whether AI ultimately proves to be a threat, an opportunity or both will depend on how firms respond. What seems clear, however, is that the pace of change is accelerating and the cost of waiting is increasing.

The future isn’t coming. It’s already here.

The question is not whether AI will transform wealth management.

The question is how the industry chooses to respond.