AI to revolutionise the wealth management industry

Nine in 10 investors believe AI can be used effectively for researching financial products

AI is set to revolutionise wealth management operations, according to a report by London Stock Exchange Group (LSEG), a leading global financial markets infrastructure and data provider.

According to the report, nine in 10 investors believe AI can be used effectively for researching financial products and services; eight in 10 say AI can better support advisors in portfolio management.

About 68 per cent of investors expect their digital experiences with wealth management firms to match those of leading technology companies, increasing emphasis on omnichannel delivery.

The survey suggests a hybrid advisory model will soon be the norm with investors welcoming AI being used in the investment journey.

Released in early October, the report The Future of Wealth: Why Consistency Matters highlights the impact of artificial intelligence (AI) in wealth management, based on a global survey of 2,000 investors conducted by the London Stock Exchange Group and ThoughtLab.

The impact of AI

AI continues to shape the wealth management industry, with 62 per cent of wealth management firms acknowledging that it will significantly transform their operations. This will need to meet the expectations of over two thirds (68 per cent) of investors who expect their digital experiences to match those of leading technology companies.

Wealth management firms cited a host of benefits that an AI-enabled approach offers, including greater automation and speed, a reduction in manual errors, cost-effectiveness and more. AI also appealed to investors substantially, promising constant connectivity, ease of use, cross-device access and lower costs.

“We are witnessing a maturation among institutions in the wealth management sector, as they increasingly articulate their AI needs,” said Sławomir Wójcik, Product Manager at Comarch Wealth Management. “This includes personalised marketing messages, recommendations for next best investments, identification of customers likely to engage, an advisor knowledge base for summarising client activity, and optimal portfolio construction to enhance results while minimising risk.

“AI significantly enhances decision-making in portfolio management by processing vast amounts of data to provide deeper insights and better forecasts. It can identify hidden patterns, revealing emerging investment opportunities and warning against potential downturns,” Wójcik added.

“AI can also optimise portfolio construction and management through real-time monitoring and continuous adjustments based on new data, ensuring investments stay aligned with clients’ objectives and risk appetites.”

The report found that AI itself could not serve as the final product; rather, it enhances the role of advisors and functions as a tool for capacity building.

The value of advisors

When asked what was the greatest value that advisors could bring in the next three years, almost half (45 per cent) of investors who currently use an advisor, and more than half (51 per cent) of those who do not, believe the primary value of an advisor in the next three years is in providing trusted investment advice.

Around a third of all investors also valued equally how advisors help to holistically meet financial and life goals; provide innovative investment ideas, approaches and opportunities; and are available when ​needed, especially in difficult situations.​​​​​​

Towards a hybrid model

The report suggested that a hybrid advisory model, blending human expertise with AI, will become the standard. Investors are generally open to AI being used in their investment journey, most prominently for researching financial products and services (more than 90 per cent) and supporting advisors in portfolio management (over 80 per cent).

“The prevalence of AI and other technological advancements is making wealth managers rethink their business strategy and client engagement models,” said Sune Mortensen, Head of Wealth Solutions, LSEG.

“There is a growing need to demonstrate value as well as effectively manage increasing trading volumes.”

Where are the opportunities for wealth managers?

The report identifies key areas where wealth management firms need to address evolving investor expectations. These include:

Delivering omnichannel experiences

Investors are increasingly expecting omnichannel experiences, with 46 per cent of investors accessing accounts via mobile apps. Wealth management firms need to enhance mobile and digital interactions. About 35 per cent of millennials and 34 per cent of baby boomers seriously consider a wealth manager’s digital capabilities when choosing a provider.

Filling data gaps

Addressing knowledge gaps, particularly in sustainable investing, can offer wealth managers a competitive edge. Over half (52 per cent) of investors who do not use an advisor, cited a “lack of knowledge about sustainable investing”, when queried about barriers in the sustainable investment space.

Cost-effectiveness

Ultimately, the bottom line was an important consideration, with almost two thirds (64 per cent) of all investors seeking more cost-effective solutions, including lower fees and simpler fee structures. Despite this, over half of all investors (51 per cent) also indicated their willingness to pay a premium for financial advice during periods of perceived volatility and/or complexity, indicating the tangible value of financial advice.