If major institutional changes weren’t enough to challenge the wealth management industry, technological innovation is about to shake up the industry. With the advent of artificial intelligence (AI), the way wealth is managed and invested is about to change dramatically. Coupled with huge demographic changes, the future belongs to those companies that are “digital natives” and embrace technology, while those that don’t will be left behind.
In the coming years, we will witness a huge shift in the industry landscape, and the impact will be far-reaching. Technology is advancing at an astonishing rate. ChatGPT, the Microsoft-backed AI, has already seen the fastest adoption rate in history. It completed in five days what Netflix took three years to do. We will see more advanced algorithms, more intuitive online platforms, and crucially, more data, so machines will evolve at a faster pace.
Too many companies think AI will only further automate routine tasks, but it will be much more disruptive than that. The traditional model of human advisors, physical offices, and paper-based processes will become history. Instead, business will be done through cutting-edge algorithms, online platforms using natural language processing, and virtual meetings.
It will bring new levels of efficiency, accuracy, and scalability. The technology will be able to analyze massive amounts of data, identify patterns, and make predictions with a precision that humans can only dream of. This will enable wealth managers to provide personalized advice to clients in real time and make investment decisions at lightning speed.
Many traditional companies fail to understand the potential for disruptive change – instead, they think traditional skills like customer relationship management will protect them. This is not the case. Debt management company Inicio is a good example. The company's trials found that customers prefer the AI interface because it is accurate, patient, and objective.
This could very well lead to the democratization of wealth management. AI will make it possible for anyone to access a vast array of customized wealth management services, regardless of their net worth. The technology will create a more level playing field.
But it’s more than just embracing the latest digital tools and technologies. The key to success in the new world is becoming a digital-first business. Even US tech giants have had to adopt this model, with Microsoft, for example, making a major shift in 2016 to put AI at the heart of all its future operations.
For many companies, this change will be incredibly difficult to make, as it requires a complete rethinking of business processes and a willingness to restructure operations in an industry that is notoriously slow-paced and resistant to change. And all this is before addressing the human capital challenges – for example, where will the scarce employees who can both understand and execute this change come from?
Instead of facing challenges head on, many established companies have sold themselves to larger companies over the past few years. Aside from the usual integration issues and diseconomies of scale, history shows that this approach is simply wrong. The vertically integrated giants are too rigid to keep up with the pace of change. Time will tell.
The real revolution, however, will occur in the context of broader social change. All major technological revolutions have dramatically altered the way human society works. For example, railroads gave rise to the rise of cities and the concept of commuting. It is unclear who the ultimate winners will be, as they are often indirect beneficiaries of the technology itself. Walmart, for example, has made more money from the shift to out-of-town shopping than General Motors has made from selling the cars that enabled that shift.
So the question for the UK wealth management industry is simple: are you ready for the future? If so, the time to act is now. Those that embrace AI and become digital natives will thrive in the coming years. The rest will be left behind. Are you ready to join the revolution?
Yes. At Henderson Rowe, we already apply machine learning to our investment process, but at Citywire I’ve gone further. Much of this post was generated by an AI that was trained to mimic my writing style. I’ve been assimilated.
