AI Could Transform Wealth Management, Says Survey



The wealth management industry started investing in AI technology more than a decade ago. A new survey suggests that those investments could pay off substantially within the next few years. From client demographics to sustainable investing, AI has the potential to reshape the sector within the next few years, said the participants. These changes could empower individual investors, but they could also weaken traditional wealth management companies.

Today (Feb. 27), economic research firm ThoughtLab released a report entitled “Building a Future-Ready Investment Firm.” The study, produced together with Deloitte and financial software platform FNZ, compiles findings from a survey of 2,000 individual investors and 250 professional wealth management advisors. The individuals represented a healthy mix of wealth profiles, age demographics, and geographic regions. The providers came from brokers, banks, family offices, online trading platforms, and similar institutions.

Wealth Management Expects Big AI Advancements

ThoughtLab’s study covered a wide variety of topics, from globalization to cybersecurity. However, AI was arguably the key theme, taking up a fifth of the report.

At present, artificial intelligence represents the most popular digital technology for wealth management providers, with 58% of respondents saying they would direct more resources toward it within the next three years. Compare and contrast to some of the other categories surveyed, such as data analytics at 42%, blockchain at 22%, and internet of things/sensors at only 8%.

A full 69% of wealth management executives surveyed agreed with the statement that “AI will significantly change the way their organizations work over the next three to five years.”

However, these industry players seem split about the technology’s possible ramifications. Fifty-two percent agreed that “advances in AI and related technologies will have a greater impact than any other trend over the next three years.” The executives also agreed with the assertion that AI automation and scaling has contributed to “significant performance gains” for about half (48%) of their companies.

Split Views on AI’s Usefulness

Artificial intelligence can often identify patterns that may be too subtle for the average human. Individual investors were generally in favor of using AI for this purpose, but not to the extent where it would fully replace a person.

For example, 92% of respondents were at least “somewhat willing” to let artificial intelligence research products and services for them. Likewise, 81% were willing to receive investment advice from an AI. Seventy-nine percent of individual investors trusted AI to prepare plans suited to their needs, and 78% to conduct risk analysis.

On the other hand, 54% of investors were “not at all willing” to let AI directly manage a portfolio. About one-third were unwilling to let AIs “ensure data privacy and security” or “reduce [their] dependence on [an] advisor.”

“I don’t see AI having the ability yet to fully understand a client’s picture and to take that into account when tailoring a solution,” said Nathan Erickson, principal financial advisor at Captrust, in the study. “An advisor can plan for [multiple] scenarios and make decisions based on likely outcomes—and on information that can be difficult to convey to an AI.”

Investors Expect Better Digital Tools

While AI took center stage in ThoughtLab’s report, it was not the only digital topic under discussion. Most investors (between 60% and 68%, depending on the particular question) wanted better digital tools from their financial institutions.

Some of these tools are fairly straightforward. Eighty-two percent of individual investors, for example, wanted to be able to review and update account information online. But other tools have traditionally required either a phone call or an in-person meeting with an advisor. Sixty-five percent of those surveyed wanted to execute transactions digitally, while 60% wanted to receive investment advice.

“Sustainable Investing” Needs Clarification

Demographics were also a frequent topic of discussion. At present, 98% of investment firms target Gen X, and will continue to do so over the next three years. These firms plan to target Millennials to a greater extent as well: 94% within the next three years, compared to 81% today. But it’s Gen Z that will likely see the biggest rise in interest, with 42% of firms planning to target them in three years, versus 18% of firms today.

Another trend that ThoughtLab covered was “sustainable investing”—namely, investing in companies that embrace environmental, social, and governance (ESG) progress. This can cover everything from green tech to political movements.

“Low returns and inadequate metrics and standards have impeded the success of ESG products,” the report observed. “As financial performance becomes more intertwined with sustainability, investors will expect advisors to keep both goals in mind when managing investments.”

The numbers seem to back up the paper’s assertion. While 66% of the professional wealth managers surveyed believe that “sustainable investing will grow significantly in the years ahead,” other ESG questions fostered significantly less agreement. Only 47% of respondents believed that “clients expect investment providers to understand sustainable investments.” Conversely, 48% claimed “many clients are not asking for sustainable investments.” They also brought up concerns about profitability and greenwashing.

Future Looks Hazy for Financial Advisors

While wealth management professionals seem generally optimistic about AI, the technology may put some of them out of business. A full 60% of Millennial and Gen Z individual investors expect that AI may supersede the need for a human advisor by 2030.

Only 28% of traditional firms expect to offer “robo-advisors” or a hybrid of human and AI-powered advice within the next three years. This may be partially because robo-advisors at financial institutions such as JP Morgan and Robin Hood were not nearly as profitable as their parent companies had hoped, according to the survey.

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