Wealth managers are adding AI to their tool kits to meet client demands

Customer expectations within the world of wealth management are constantly evolving. Today, investors demand personalization, instant service and a pleasant experience throughout. Institutions and challengers must cater to the modern client in digital landscapes. 

Traditionally, the role of the wealth manager has focused on sales and managing conducive client relationships, all while maintaining a suitable level of financial literacy and clarity. Although this position hasn’t required the latest technology, its future sustainability will now revolve around ever-advancing products and services. 

In the future, it’s not only inevitable that more digital elements will become intertwined with the wealth management landscape, but it will also become imperative for firms to incorporate digital transformation tools to outpace industry rivals. 

The road to digital transformation may seem like a jarring concept for traditionally focused wealth management institutions, so let’s take a deeper look at what the future of digitally-driven wealth management solutions will look like: 

Overcoming wealth segment saturation

Given the level of market saturation for UHNW (ultra-high net worth) and HNW (high net worth) individuals among traditional institutions, more key players in the wealth management sector are looking to win appeal among growing affluent and lower HNW clients. 

While these segments refer to individuals with a net worth of between $300,000 and $5 million, research conducted by Oliver Wyman’s Wealth and Asset Management has determined that a potential revenue pool of $230 billion is accessible for firms, with just 15%-20% of this group being served by wealth managers at present. 

The research suggests that these emerging segments can help generate $45 billion of new industry revenue while accounting for around 60% of the total wealth management revenue pool by 2026. 

Crucially, this new competitive wealth segment is ripe for innovation, and the growing number of affluent individuals is generally more receptive to digital transformation tools. This opens the door to a high revenue pool for firms that have the ambition to modernize processes ahead of their competitors. 

Measuring the impact of digital transformation

When it comes to wealth management digital transformation, there can be myriad challenges facing industry innovators that may not be as impactful in other industries like retail, manufacturing, and marketing. 

Maintaining compliance in a dynamic regulatory environment can be challenging, and overcoming fierce competition from resourceful challenger banks may be a daunting prospect for smaller wealth management firms. 

Today, digital transformation in wealth management relies on digital-first experiences and firms must discover solutions to allow clients to view and access portfolios online. Advisers should also become more accessible as a digital point of contact while offering more focused and personalized solutions. 

How will true personalization be achieved? Digital transformation within financial services will be built on data analytics and artificial intelligence). By utilizing the right AI solutions and by maintaining a focus on harnessing the potential of generative AI, firms stand a better chance of competing against the threat of market saturation. 

The race to harness the potential of AI

The recent rapid growth of generative AI has helped players in the asset and wealth management industry optimize their operations on an unprecedented scale. 

The presence of AI is sure to be felt throughout the operational, financial, research and analytics, risk management, investment relations, and regulatory compliance departments of organizations, with significant potential for further innovation. 

“We think that AI will only accelerate digital transformation,” explained Yoni Assia, founder and CEO of eToro. “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.” 

When it comes to wealth management, generative AI has the potential to enhance the quality of data at the disposal of firms while optimizing the ability to mine structured financial data in a way that drives reliable results alongside unstructured data, such as investor documents. 

The technology can also bolster the ability of firms to analyze a client’s portfolio and recommend investments based on metrics like risk tolerance, financial goals, personal circumstances and retirement horizons. 

The arrival of personalized wealth management

The more advanced data analytics offered by next-generation AI solutions can help deliver unprecedented levels of personalization for clients. 

Through these tools, it’s possible to create more tailored advice and customer support through digital platforms while leveraging AI and machine learning technologies for more responsive and bespoke decision-making. 

This greater element of personalization will help businesses to unlock untapped potential throughout a range of high-net-worth clients and win the trust of younger individuals experiencing growing levels of wealth. Accompanied by personalized product recommendations, real-time fraud prevention and general process optimization, digital transformation will deliver a comprehensive experience for all industry participants. 

The wealth revolution will be app-based

The digital transformation revolution will influence wealth management on an operational level in a number of ways. One thing we can be sure of is that these services will be app-based, rather than accessed in person at brick-and-mortar locations. 

As for the financial world, digital transformation is accelerating the acceptance of finance-based apps. 2019 saw 1.2 billion downloads of finance-based apps; that figure grew to 2.7 billion by 2022. Expectations are that these astronomical figures will reach 3.9 billion by 2027. 

For individuals in all wealth segments, the message is clear: digital transformation revolution is underway, and it’s more accessible than ever.