The Arrival of Artificial Intelligence in Wealth Management

By 05/22/2023 No Comments

The wealth management sector, commonly referred to as the “asset management industry,” is generally seen as embodying traditional values and providing discreet services focused on client needs. However, in an increasingly interconnected world, people are seeking both convenience in offerings and cutting-edge digital experiences. Amidst growing competition, the field of wealth management is not exempt from the wave of AI-related services. In fact, the integration of modern tools has become a topic of increasing interest. Currently, artificial intelligence has the potential to increase profitability rates by an average of 38% by 2035, according to a report published by Accenture and industry experts in wealth management. Embracing a culture centered around AI-driven “portfolio construction,” priority is given to the concept of personalization. The presence of artificial intelligence has made significant progress, particularly in the context of financial institutions. The ability of AI to handle large amounts of data, automate repetitive processes, and accurately identify anomalies proves particularly valuable. AI serves as an aid not only in streamlining workflows but also in increasing service accuracy, minimizing the risk of human error. The current landscape shows a considerable increase in the utilization and adoption of AI, especially in automated wealth investments. However, those responsible for such activities have generally exhibited resistance to incorporating artificial intelligence into advisory processes. Nevertheless, the time has come for AI to play a more significant role in areas such as user and consumer portfolio analysis or optimization.

The Advantages of Customer Focus

In the near future, it will be unlikely for wealth managers to effectively serve clients without a digitalized operating model. The presence of various modular data and IT architectures will increasingly support the evolving advisory activity, especially in terms of investments. The need for large-scale personalization becomes more apparent, which in turn implies broader product offerings. For wealth managers interested in gaining a competitive edge, understanding the potential of implementing advanced analytics and offering a set of measures to include in a digital transformation is crucial. Acknowledging the growing complexity of financial markets is a necessary step in better understanding the ongoing technological revolution in many financial institutions, as well as the wave of change sweeping through the asset management industry. The transitioning landscape is evident, primarily from the perspective of IBM’s predictions, with the projected investments in artificial intelligence software reaching $64 billion by 2025, rendering obsolete the strategies of managers who have operated in the past. Therefore, it is essential to strike a balance and implement a risk management strategy by calibrating operations based on specific client preferences and market insights. In this regard, thanks to the vast and continuously growing potential of AI, wealth managers who invest in AI-related products and services are likely to experience significant long-term advantages. Projected estimates confirm that global artificial intelligence in the fintech market will reach $41.16 billion by 2030. Thus, investing in AI will help wealth managers optimize services for their clients. In summary, personalization and the creation of a tailor-made portfolio produced by artificial intelligence represent the future of wealth management through the exploitation of algorithms and AI-related investments. Consultants will be able to align their approach with individual needs and investment goals of their clients, following a path of convenience. Thanks to new AI software and platforms for managers and wealth managers, it is now possible to build investment portfolios on a scalable level and adjust their tactical positioning.

ChatGPT and the New Dimension of Wealth Management

ChatGPT is an artificial intelligence-based system that can provide relevant answers to questions and generate original texts based on a few keywords. Its intelligence is built upon a massive corpus of text (approximately 45 terabytes) that it analyzes using machine learning. OpenAI, the company behind ChatGPT, released a free prototype in November 2022, which quickly gained popularity, attracting 100 million users within two months. The company expects to reach 1 billion users by the end of 2023 and plans to transition to a paid service, although its business model has yet to be defined. Microsoft, which provides the significant computational power required by ChatGPT, has invested $1 billion to gain access to its code and intends to invest an additional $10 billion in the coming years. ChatGPT can assist wealth advisors in various ways, including providing timely, accurate, and personalized responses to client requests and inquiries about financial planning. It can generate reports, summaries, and financial projections based on client data. Furthermore, it can offer ideas and recommendations on investment opportunities and portfolio diversification, assist with client onboarding, account opening, and data management activities, and overall enhance the efficiency and accuracy of the advisory process. In essence, ChatGPT differs from an expert system due to its “conversational” capability and its ability to mimic human interactions. It contextualizes its responses, structures them in a logical and easily understandable manner, and doesn’t hesitate to introduce elements of empathy and reassurance. This conversational aspect sets ChatGPT apart and adds a new dimension to wealth management.