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Artificial Intelligence in Wealth Management – Friend or Foe?

by jcp gbaf

By Dr. Boris Rankov, Head of Digital Advisory at InvestCloud.

The words ‘artificial intelligence’ can sometimes invoke a sceptical feeling in the financial services industry. Many still fear a sci-fi world in which too many systems becoming automated, and human roles becoming redundant. In reality, this is not the case.

AI needs a rebrand. Rather than “artificial intelligence” think of it as Augmented Intelligence. AI has the ability to facilitate an adviser’s daily interactions with clients and to transform a client’s experience of digital financial services. It may seem like a big claim, but the potential all lies in the ability of state-of-the-art AI technology to exploit the vast amount of data that is generated and stored within a financial institution to accelerate adviser productivity and to personalise a client’s digital experience with his or her financial services provider.

AI is a superior technology to automate a multitude of swivel-chair and repetitive processes, but the human aspect of AI technology shows how financial services providers can have a symbiotic relationship with AI. As the technology learns from past and real-time data fed to it by humans and systems, monotonous tasks are alleviated for employees—leaving client advisers to instead focus on building personal relationships with their clients and creating additional value for the business.

And for the sceptics that may remain, a study by Accenture looked at High Net Worth (HNW) investors in any generation familiar with digital technology – termed by them as “Generation D”. Of the data sample, 75% believe digital could improve their investor-adviser relationship, and 80% anticipate digital will increase access to their adviser.

Client retention is just as, if not more important, than bringing on new business. To do this, wealth advisers must build and maintain trusted client relationships through timely, relevant, and personal advice. Using digital tools – like machine learning and AI – will help advisers understand what the clients want, and when, i.e. being able to share the right insight with the right client at the right time through digital channels.

The addition of AI into both a client’s and adviser’s workflow shouldn’t be seen as a replacement for human interaction. Instead, it’s what can augment that human interaction making it more personalised, efficient and valuable.

How to retain clients using AI

The demand for tailored services and personalised content is skyrocketing in all service areas, including private banks and wealth management firms, whose clients expect to receive personalised investment advice.

Clients are receiving digital personalised services in other parts of their life, and so, they now understandably question why it can’t be this seamless when it comes to their financial lives too. For example, look at Spotify – the music streaming service that has daily recommendation play lists, suggesting what you could listen to next. Spotify’s algorithms don’t just suggest albums, artists, or personalised playlists based on a user’s history with the service. It expands this to creates an artificial relationship whereby the user believes that Spotify knows them on a personal level – so much so, that they trust an algorithm to make their music selection for them.

Now imagine that kind of personalisation, but with the added benefit of a client adviser who they can physically see, speak to, and seek advice from.

Personalisation is at the core of delivering the best service to your client. According to Capgemini, technology-driven hyper-personalisation will be critical for loyalty and growth in the wealth management landscape throughout 2021. The company reported last year that less than half of younger as well as older high net worth individuals say their wealth management firm understands their unique needs in its “World Wealth Report”.

AI and machine learning optimises client engagement at scale. When harnessed alongside the knowledge a client adviser has of their client, AI can be used to precisely define the Next Best Action to take on their portfolio. It does this via recommendations that match the recommendations from the Chief Investment Office (the “House View”) to the right clients—based on analysis of current products and stocks within a client’s portfolio, past transactions and click behaviour within the financial institutions content portal. This approach helps to drive further efficiency while creating greater value in client interactions and investment decision-making.

Looking good to your client is part of delivering value and creating trust, and one way of thinking about incorporating AI in this way is that it makes the client adviser look even better. There is a level in scale and personalisation that goes beyond what a human can do.

A 360 degree view

Taking into account an individual’s financial as well as personal goals creates an entire view of the client and a deep understanding of the client’s core values. It’s important to understand how the client feels about their finances, what their confidence levels are like when making tough financial decisions, and how those decisions can feed into and shape life goals.

Understanding clients at this kind of granular level means that advisers create a lasting relationship that extends throughout the client’s entire life – and across generations.

Crucially, this doesn’t have to be a burden on the client adviser from a time or energy perspective. Utilising data and building AI algorithms that can help, not hinder, a client’s experience will lead to a more streamlined, effective, and most importantly, personal processes.

While digital tools are not a replacement for human interaction, they will automate the heavy lifting and amplify advisers abilities with the ammunition needed to create a service that is exactly what the clients need and want – at scale. The opportunities for unlocking new sources of value for clients and, in turn, improving the business of your wealth management operation are already there—it’s time to take the plunge.

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