How Artificial Intelligence is Killing the Wealth Manager

Published on Jan. 08, 2019

To many Wealth Managers, Artificial Intelligence (AI) might sound like something you’d see on a Blade Runner-like movie. Some vague robotic entity that’s coming to digitize our daily tasks, take our job from us and -once they’re done with the business part- take control of the planet. 

But let's not worry that much.

For better or worse, all kinds of industries use AI nowadays and there's no way we can stop that. Wealth management is not an exception. Artificial Intelligence is one of the main trends in the wealth management industry.

Some studies predict that, by 2019, the application of automation and AI to business processes will triple. And that’s just in 2019. Imagine what will happen in a couple more years. 

“The retail investment management industry, until relatively recently, had many manual processes baked into each transaction and service –KYC paperwork, loan approval, (human) advisor-centric investment processes, and the list goes on,” said Ben Fried, CEO and Co-Founder of Cred, a Tel-Aviv based fintech operating in the US and Europe. “AI has enabled automation and acceleration of these tasks to near-real-time processes, while lowering the cost of doing business."

Artificial Intelligence helps us automate many tasks that used to need the human element. And thus, many professionals might be substituted. 

In fact, a study conducted by Autonomous Research estimates that thousands of jobs will disappear by 2030:

artificial intelligence wealth management effect

artificial intelligence wealth management effect 2

There is hope, though. It's a fact that AI will never completely replace the human touch in wealth management. But yes, it will change the way we do things. 

What changes will AI bring to Wealth Management?

Many. Some of them will be barely noticeable, some of them will be impossible to ignore. But all of them will be there and will change the way wealth managers work. And, in the end, they’ll change the wealth management industry, both for customers and companies. 

We have put together some of the main ones:

Customer behavior will be easier to predict (and that’s great for everyone)

That’s wonderful news for wealth managers. Some companies have already started working in this direction, by implementing AI in different business processes. 

By providing each client with customized investment products, you improve user experience and -what’s more important- maximize conversion and customer loyalty.

To take one example: by analyzing large amounts of unstructured data and identifying client patters, you could know which specific financial services will interest a certain group of high-net-customers. Once you have gathered that information, you can run highly-targeted marketing campaigns an offer tailor-made services.

Who wouldn’t want that? 

“Consumers’ and SME’s behavior and needs are changing fast,” said Rosali Steenkamer. Steenmaker is CCO and Co-Founder at AdviceRobo, a startup that has developed software for predictive risk. “There is an immense data explosion with structured and unstructured data. Only big data-driven models, Machine Learning algorithms and Artificial Intelligence can tackle this to serve the right solution to the right customer. Traditional technology is simply not able to deal with these challenges.”

“AI is an opportunity for all parties in the financial services industry,” said Steenkamer. “It will make the delivery of products and services really personal. It will make product development more fact-based. It will support banks to proactively service customers who might have payment problems, just to mention a few options.” 

Regulation, finally under control

Since the financial crisis, regulation in the Wealth Management industry has grown exponentially. Anti-money laundering programs, billing fraud oversight or sanctions list monitoring are just a few issues. There are many compliance functions that companies must keep in mind.

In order to address this matter, banks and wealth management firms have hired countless compliance officers who try to make some sense out of large amounts of data. And that’s the perfect recipe for human error. 

This is - yay! - where Artificial Intelligence comes in handy. 

Innovation in Natural Language Processing (NLP) allows us to process information that comes in the form of human language. That means a machine should be able to read and make a certain sense of a document. 

AI software helps companies cut costs, reduce errors and it gives employees the opportunity to focus on more relevant tasks. 

Happier customers are on the way

Artificial Intelligence is not just a great tool for corporations. Customers will also notice its benefits. From Ben Fried’s point of view, customers will experience three main changes: Lower entry barriers, lower costs and better offer due to higher competition.

AI will help “the underbanked.” “While technology has exacerbated the wealth divide in many countries, in fintech it is enabling provision of services to a previously underserved sector. Betterment, Acorns, Stash, and others have the democratized investment advisory industry enabling regular folks access to the amazing power of compound interest.”

There’ll also be a cost reduction for customers. “The financial services industry has long enjoyed a high level of profitability – although until relatively recently, this came at a high cost for customers. Today’s leading financial institutions (FIs) have streamlined their businesses and expanded their reach in a customer-centric approach, driving profits through scale and value-added services.”

And higher competition will also have its effects. “Classic FIs have been effectively competing for generations, knowing that there is a large pie to share. It is the new, non-classical entrants to the market – Amazon, AliPay, PayPal, and others – that bring a new, dangerous dynamic into the mix, blurring the line between a Financial Institutions and the best consumer tech companies,” said Fried.

“This competition is a positive force for consumers – and has led to a drastic shift in the way FIs acquire clients (digital) while forcing better service through investment in R&D to keep customers “bundled” (for example, Zelle).”

What will happen to those Wealth Managers that don’t adapt?

“They will finally disappear,” Steenkamer noted. “Data will drive business models and new technology is needed to cope with the immense amount of data.”

“Fintechs can support big corporations with applying AI and accelerate the application of it. Some AI related fintechs will become a threat but at Advicerobo we believe more in cooperation between Fintechs and large corporates.”


Before we finish, let's clarify: Artificial Intelligence is not really killing Wealth Managers (we were a bit dramatic when choosing the title).

Artificial Intelligence and technology are changing the way Wealth Managers work, and it's going to give them a lot more time to focus on relevant tasks and automatize those that don't add value.

So - Wealth Managers, don't panic. If you are aware of what's coming and you know how to make it work in your favor, you'll be fine. If, on the contrary, you wait and see what happens, chances are you'll be replaced soon, either by software or by the competition.

Artificial Intelligence might be the secret weapon for Financial Institutions. And there's so much more innovation going on. 

Plug and Play is a Fintech accelerator that matches cutting-edge startups and the largest corporations. Join our platform today.

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