There’s a problem with the adoption of artificial intelligence in wealth management and has to do with the term “AI.”
The latest fintech products are touted as AI-empowered and AI-enhanced, ad nauseam, but industry observers occasionally point out that not every new solution is technically using the technology. There are also varying degrees of artificial intelligence, and some tools on the ground today aren’t utilizing the full spectrum of analytics offered.
The problem is not that AI isn't being used enough, but that there’s a certain cachet associated with the term and companies are well aware of how to cash in on the popularity of jargon.
The truth is some of the extraordinary ways the technology is being used to transform the financial services industry are actually in other sectors altogether.
AI is, for example, analyzing satellite imagery of shipping ports to determine the volume of oil in tankers to give traders an edge on the performance of certain commodities. Similar technology is utilizing social listening to analyze millions of social media posts a day to gauge the buzz around new product launches from publicly traded companies.
All the hype around what AI is doing can sometimes muddy the waters in terms of where the technology is actually providing returns on investment for wealth managers.
A major win in the advice industry has been the intelligent dashboards that firms have rolled out in earnest during COVID-19. Many suggest "next-best action” recommendations for clients based on thousands of interactions with investors with similar financial outlooks. Advisers at some of the largest financial institutions with deep enough pockets to make substantial tech investments — like Merrill Lynch and Morgan Stanley, to name a few — have benefited.
Don’t get me wrong, there are dozens of other examples of fintechs launching cutting-edge tools that are helping advisers cut back on expenses and making their lives a whole lot easier. But, what’s working in wealth management right now is decidedly less sexy than what’s being developed on the trading floor.
“There’s a lot of hoopla and public relations gobbledygook out there,” said Dan Faggella, head of research at Emerj Artificial Intelligence Research. “Finding the junctures where AI can really add value is a very challenging proposition for wealth managers.”
The major hurdle is testability, he said. For wealth managers, the return on investment of AI tools is difficult to define because of the intangibles of wealth management — like the strength of the adviser-client relationship — are not as clear cut as running an A/B test on a new fraud detection product at a big bank.
That means, for advisory firms looking to bring on new tech, the ROI associated with tech investments can be harder to justify.
Clarifying the terms of what AI is and what it's not could be a first step in determining the real impact the technology is having in wealth management. It could also help advisers calculate returns, in dollar amounts, that AI can have on their advisory businesses.
If every new product gets labeled AI-enabled or empowered, can advisers realize the true benefits additional adoption can make?
The upside is projected to be considerable by almost all accounts, according to recent data. The global market for AI providers in asset management, for example, is expected to reach $13.4 billion by 2027, according to a report by Grand View Research — that’s a 37% compound annual growth rate from 2020 to 2027.
Many advisers will likely benefit at a more incremental pace as new technologies gradually make their workdays easier through automation.
The real upshot might not be a breakthrough watershed-moment that transforms the industry like AI prophets predict. It might just give advisers a little more time to do what AI cannot — build relationships with clients — and that’s ultimately what provides the most value to advisers.
To get there, we could benefit from laying off the jargon for a while.
From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.
Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.
“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.
Sellers shift focus: It's not about succession anymore.
Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.
RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.
As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.
