How Digital Technology and AI Will Change Wealth Management

The global wealth management industry faces converging megatrends that are redefining investor needs and reshaping the industry at a time of growing economic and geopolitical uncertainty. These trends include rapid technology innovation, mounting regulation, heightened competition, and broad demographic shifts. 

To investigate these developments and how they affect the industry, ThoughtLab has conducted a multi-client research program called Building a Future-Ready Investment Firm. As part of the study, we asked experts and sponsors a set of questions regarding how technology—including artificial intelligence—will change the wealth management industry and how work gets done. This article provides their answers to these questions.  

 

Which emerging digital technologies do you expect will have the biggest impact on the future of wealth management? What should investment firms do now to prepare?  

Carl Robertson, Global Chief Marketing Officer, FNZ: The race for competitive advantage in wealth management is increasingly being fueled by advances in artificial intelligence (AI) and machine learning (ML). We expect these technologies to play an increasingly important role as firms look for ways to create hyper-personalized wealth management services tailored to investors’ unique financial goals, risk tolerance, and holistic wealth picture.  

With extreme automation streamlining routine tasks and predictive analytics anticipating market trends, advisors can also use these advances to free up more time to focus on personal, human interactions with clients. And the question is no longer human advisor vs. digital advice: the answer is clearly that investors need and expect both. 

Investment firms need to lay down the digital groundwork to harness these technologies. Already we’re seeing a significant shift from using investment firms towards using modern, digital, end-to-end platforms that can leverage these emerging technologies to manage all aspects of a client’s needs, as well as deliver significant cost savings and generate new revenue in today’s dynamic financial environment. 

Mark Smedley, Financial Services Industry Executive, Genesys: AI, broadly defined, seems to be here to stay. Large language models (LLMs) for text, as currently envisioned, are likely to be refined and offered with more targeted data sets at lower cost. Voice biometrics are the subject of significant focus and investment. And independent advisors will likely have technologies available to them that only the largest institutions could previously afford. 

Dean Butler, Managing Director for Retail Direct and Advice, Standard Like UK: The key drivers will be automation, available large and holistic data sets (open banking in the UK), one view of the customer, and implementation of AI to aid the process. The democratization of wealth will also put the experience in the palm of the customers hand (via an app) with an engaging user interface (UI). The customer will be able to see in real time their financial position and automated steps to take action. Wealth management will go from being a proposition designed for the wealthy (and high new wealth) to being obtainable to most.   

April Rudin, CEO and Founder, The Rudin Group: The underlying challenge that most wealth management firms face regarding emerging digital technologies lies in change management and ultimately firm culture, which is beyond any individual technology itself. It is this preparation of existing talent and hiring of new talent that most investment firms should be considering and planning for. If there is no adoption or limited/uneven adoption of technology within a firm, can it be called successful? 

Firm culture plays a significant role in this process, and I expect the next generation of leaders to make great changes to the way firms operate and offer a more robust and fuller range of financial services beyond merely investment management. This means an increase in areas like financial literacy, education, tax planning, debt management, and the like. 

Dr Henning Stein, Fellow, Cambridge University Judge Business School: The biggest challenge may involve the ability to compare impact results to those of peers. I could imagine a platform where the quantifiable impacts of these strategies are made public in real time, in an ‘Impact Dashboard’ if you will. Envision QR codes on consumer products, linking back to real-world projects funded by sustainable investments—projects that both consumers and investors can actually see and feel. Imagine using blockchain to transparently track the life cycle of a sustainable project from investment to impact, thereby creating an indisputable record of real-world change.  

Imagine a world where the choices you make as an investor not only fuel innovation but also directly impact the price tags on your grocery store shelves. That’s the potential impact of technology for asset managers and wealth managers. 

Jean-Francois Lagasse, Global Wealth Management Leader, Deloitte Switzerland: An unforeseen volume of customer, competitive, and environmental shifts is emerging and evolving in the sector. The convergence of these shifts is creating new pressures and opportunities for wealth managers—for both individual product profit pools and the overarching business model. 

Kendra Thompson, National Wealth Management Leader at Deloitte Canada: The convergence of these technologies is what will fundamentally re-shape the wealth management value chain. Individually, this includes digital cloud-based applications, data and predictive analytics, API-based architecture, straight-through processes, and generative AI. Separately, these technologies are powerful. Together, they will change the face of wealth management as we know it. Firms should start by educating themselves in these technologies and how they deliver client, advisor, employee, or business outcomes. This provides the basis to articulate a target state and roadmap to build towards the future. 

 

How do you believe AI—especially generative AI—will change wealth management? Where do you see the most effective AI use cases? How will firms need to change their governance and policies to minimize risks? 

Din Mustaffa, Group Chief Strategy Officer, FNZ: We see one of the biggest uses of generative AI in augmenting the advisor-investor relationship. There are numerous use cases around personalized investments emerging, both to help with portfolio construction and decision making, and to provide analysis and insight into the custom portfolio itself. As the pressure to provide personalized wealth solutions increases, it is likely these use cases will gain greater acceptance. In particular, more generative AI chat bots will emerge to augment financial advice. 

On the administrative side, the sheer volume of client and counterparty communications to interpret (email, documents, forms, chats, voice calls, etc.) is becoming an industry wide headache—and a regulatory risk. AI clearly lends itself to extracting the relevant information, monitoring for compliance, and keeping a record for all of what was said, and is becoming integral to ensure adherence to compliance standards while minimizing operational risk. Advisors are now freed up from much of their administrative burden, to build more personalized end-investor experiences.    

Yoni Assia, Founder & CEO, eToro: We think that AI will only accelerate digital transformation. eToro’s quarterly survey of 10,000 retail investors across 13 markets reveals that consumers are open to using AI to pick or alter their investments. They are interested in using AI to pick stocks for them because they don’t have the time or don’t trust their knowledge.  

Just as Uber took advantage of inefficiencies in travel and AirBnB in hotel stays, AI will squeeze out inefficiencies in investing, taking care of the elements that humans don’t (or are not perceived to) add value, such as in portfolio construction. This isn’t confined to younger investors. Over-55s are ready to integrate AI and machine learning into their investment approach. Around one in six in our survey say they plan to increase investments in sectors that stand to benefit from AI. Almost half of this age group would use AI or machine learning to manage their portfolio rather than a human fund manager.  

At eToro work is already underway to see how generative AI can be deployed to our employees and customers. With over 34 million registered users and 3 million account holders globally, we have a lot of data and AI loves data! It’s been a natural evolution for us to experiment and enhance our intellectual property leveraging natural language processing and generative AI, for example for our Copy investor capabilities. We are also looking at how generative AI can help users slice and dice the information in our social feed more deeply and creatively. We’ve been using AI to enhance our customer service experience using it as a tool to empower rather than replace our customer service agents.  

There is more we are working on, but you won’t see it all immediately as it is vital for us to have the necessary guard rails in place. Like with any new technology, we need to ensure that AI is a force for good and that we have the necessary checks and balances. 

Mark Smedley, Financial Services Industry Executive, Genesys: AI is a very broad category, but for wealth managers and investors, clearly the capability to enhance or replace fundamental research already exists. The investment advisory side might be another matter entirely. In any case, the client experience is likely to be significantly enhanced with the combination of AI for both text and voice.  Authentication, identity, and recommendations will certainly be enhanced with leading AI. 

April Rudin, CEO and Founder, The Rudin Group: We have not yet discovered the ways that AI will change wealth management. One thing is using it to increase the knowledge level/experience of new advisors to jumpstart them with the knowledge that more experienced advisors might have and knowledge that formerly could only be acquired over time. I have not seen anyone doing anything as innovative as that. Because wealth management and financial services are highly regulated industries, the Securities and Exchange Commission (SEC) and other governing bodies will need to provide guidance, especially around advice giving. 

Brie Williams, Head of Practice Management, State Street Global Advisors: Data is vital as its utilization rapidly evolves. The wealth management industry is undergoing a transformative shift as it redirects its focus toward embracing more comprehensive and advanced descriptive and predictive analytics. This transformation aims to craft more complete client profiles, equipping financial advisors with the tools to make better-informed decisions, manage risks, and tailor services and solutions to each individual client’s unique needs and goals.  

Amid the buzz surrounding AI and other emerging technologies, the industry faces a critical need to distinguish the genuinely beneficial from the overly promoted, navigating a labyrinth of often misleading information. This underscores the importance of oversight and governance to safeguard the interests of wealth management clients and maintain trust.  

In this shifting landscape, the stakes are higher than ever, emphasizing that technology, while promising, must be effectively and ethically employed. In the era of AI in financial advice, the significance of human relationships remains paramount. While technology can enhance efficiency and recalibrate strategies, it falls short in providing emotional support and holistic comprehension of clients’ unique life events and financial well-being. The trust and value derived from authentic human interactions with financial advisors are irreplaceable, making them indispensable in a landscape increasingly influenced by AI. 

Dean Butler, Managing Director for Retail Direct and Advice, Standard Like UK: It’s essential that the correct use cases are selected for the use of AI in the first instance. Immediately AI can be used in conjunction with an adviser and their customer. The AI solution can listen to the conversation and proactively check and complete the data sets (fact find) as required. It can also act as an oversight function—checking customer venerability and ensuring that the adviser asks the correct questions to gain the required information, ultimately acting as an assistant.   

As AI models become more complex, there will be a time in the near future when the models can fully create holistic advice cases. However, this will require that the correct checks and validations are in place. And customers today still need human/advisor validation to make key financial decisions.   

Tim Worner, National Wealth Management Leader, Deloitte Australia: AI, particularly generative AI, will enable wealth managers to enhance operational efficiency, drive top-line growth, and mitigate risk. The most effective AI use cases in wealth management include improving advisor productivity through tasks automation and personalized client engagement, streamlining client servicing functions, optimizing technology and operational efficiency, and enhancing regulatory compliance monitoring.  

To minimize risks associated with AI adoption, firms will need to establish robust governance frameworks, encompassing ethical considerations and regulatory compliance. They should develop policies that ensure transparency, accountability, and responsible use of the tech, while also prioritizing data security and privacy. Regular training and education programs should be implemented to ensure employees understand the capabilities and limitations of AI systems, fostering a culture of smart experimentation and continuous improvement. 

Overall, AI, especially generative AI, holds the potential to revolutionize wealth management by driving cost savings, revenue growth, and improved client experiences. However, careful attention must be given to governance and policy frameworks to address potential risks and ensure ethical and responsible AI deployment. 

 

How will wealth management teams and advisors get work done in the future? What will technology do and how will the role of people, particularly investment advisors, change?   

Tim Neville, CEO, Asia Pacific, FNZ: The landscape of advisory firms is constantly transforming. Technology and integrated services allow advisory firms to offer market-leading personalized wealth solutions that extend to more clients at an industrial scale.  

This transformation is facilitated by the extreme automation of mundane tasks, freeing advisors to concentrate on holistic client management—the discussions and moments that matter. Many technologies, including artificial intelligence (and its many forms), will play a pivotal role in enabling advisors to scale their services without sacrificing the personal touch and behavioral guidance crucial to financial advising. The shift towards complete wealth planning at an individual and family level will continue to grow, with a greater reliance on outsourcing portfolio construction and tailoring investment strategies to individual client and family needs. 

To truly bring this to life, advisers must be able to access a seamless experience from the customer to the wholesale marketplace. This requires end-to-end integration of traditional adviser technology solutions through to the marketplace—giving the consumer complete access to well-priced wealth solutions that meet their needs. 

Mark Smedley, Financial Services Industry Executive, Genesys: Advisors should be preparing to reach clients through digital means in addition to voice calls. The acceleration of cloud adoption and digital transformation will require providers and advisors to use these technologies, including generative AI, in efficient, useful, and compliant ways. That requires a new knowledge-based approach. While the daily activities of an advisor may evolve, it’s unlikely they’ll be replaced. Self-service for certain transaction types, wealth-bots and certain research may be viewed as disruptive, but they also significantly enhance the role of the advisor by enabling them to focus on high value interactions and client experiences. 

April Rudin, CEO and Founder, The Rudin Group: Wealth management teams in Europe are a bit more nuanced, with relationship managers separate from investment managers and also business development managers. There can and will be great advancement in each of the newer areas of customer service/client experience that will enhance the time and amount of personalization that people can provide vs. the mundane repetitive tasks that technology can do well. More and more, better data and analytics will improve all areas of the delivery of advice for both advisors and end- investors alike. 

Dean Butler, Managing Director for Retail Direct and Advice, Standard Life UK: A new proposition is emerging in the market: the bionic adviser. This concept combines the “digital-first, always-on” approach with the support of a human adviser. By seamlessly integrating technology with financial advisors, it aims to reduce the cost of delivery and service, creating a straight-through processing system that offers continuous advice and guidance. Straight-through processing is an automated process done purely through electronic transfers with no manual intervention involved. 

The advisor will focus on understanding and engaging with customer needs, while the technology will craft personalized and tailored advice cases. This approach highlights the best actions for both the adviser and the customer to take. The advice, connected to extensive data sets, will always be available. Propositions will evolve beyond one-off consultations or annual check-ins to provide proactive, continuous advice and guidance. This system will connect customers to human advisers at the most opportune times. 

Furthermore, the traditional model of face-to-face meetings with advisors, often costing over 3%, will evolve. It is now expected that advisory services can be conducted remotely via chat or video at a lower cost, thus removing barriers to entry. It’s noteworthy that currently, 90% of the UK public does not consult with a financial adviser. 

Brie Williams, Head of Practice Management, State Street Global Advisors: Navigating the challenge of shaping the right agenda grows increasingly intricate. Yet amid this complexity, optimism prevails for a profound transformation in how work gets done and the very essence of financial advice. Advanced technological solutions propel this shift, automating data-driven decision making and facilitating hyper-personalization, fostering continuous engagement with investors. 

This technological metamorphosis serves as a catalyst for financial advisors seeking efficiency gains. Machine intelligence streamlines operations, reduces administrative workload, and ensures agility amidst greater fee transparency and lower costs. Embracing technology is integral for achieving the highest-impact business transformation, measured by new growth, adaptation of the traditional core business, and healthy financial performance.  

Advisors, recognizing the opportunity to differentiate with holistic financial planning, evolve from traditional investment roles. They set new standards in delivering advice and investment products, providing guidance and strategies that thoughtfully consider the interplay between various aspects of a client’s financial life, including any conflicting objectives. This advice delivery model seamlessly integrates with technological advances, empowering clients to monitor, adjust, and progress toward their aspirations. It’s the best of both worlds: a forward-thinking approach that combines technological innovation with the human touch of personalized financial advice.