Navigating AI’s potential in wealth management
AI’s impact on the wealth management industry will be far-reaching, but drawing all its benefits will require a balancing act. Just because you can, does not always mean you should.
I recently had the pleasure of speaking at Temenos’s Regional Customer Forum in Sydney and whilst en-route, yet another newsletter with a stark regulator warning about AI adoption dropped into my inbox.
This is not unique to Australia, there are hundreds of global reports that suggest a great deal of current AI adoption is taking place without clear policies in place to control risks, monitor output and eliminate bias.
It’s impossible to ignore AI and we cannot underestimate the long-term impact that AI and machine learning will have in the future although as Bill Gates once famously said “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten” – perhaps we should temper our shorter-term expectations?
At a time when many wealth managers are seeing margins squeezed by the ever-increasing costs associated with providing advice, it is no surprise that many are investigating how they may leverage AI to automate manual processes or add value to their client experience.
With the generational wealth transfer in full swing, we are also advised that a new breed of younger, digitally savvy and mobile native consumers will wish to engage with their advisers in new ways – that they would prefer a more remote, channels focused experience.
My concern with this is that each wealth manager, and indeed each customer is unique. We derive value and satisfaction in different ways. Whilst some may indeed value the ease and convenience of a remote, 24/7 channels experience, others may value ‘real’ face time with their trusted adviser.
Wealth management and insurance products are generally intangible at the point of sale. The true value of advice may not always be immediately apparent for many year into the future and as such, they are bought on trust – trust that is usually earned through lengthy and thorough face to face interaction.
As post-Covid debates on ‘return to office’ policies continue to rage with a strong case being made for the value of ‘real world and in person’ interaction leading to better outcomes – so why are many companies now scrambling to push some parts of their customer experience into a digital channel?
Whilst reducing the cost of advice and protecting margins is vital, it is important that wealth managers validate assumptions about where their clients truly find value in their service offering.
It is also important to continually measure metrics, revenue, costs, adoption and customer satisfaction both before and after the implementation of any digitized or AI focused to ensure they are in fact achieving the desired outcome.
Missteps will undoubtably made but the metrics will allow firms to fail fast and abandon those process changes that are not deemed to have succeeded.
In my personal experience, I value the direct contact I have with my advisor, and I have yet to discover a chatbot I haven’t screamed at.
In looking at which parts of your advisory process you could digitize or where within your organization you may wish to embed AI or machine learning applications, it may be important to remember the mantra – just because you can, does not always mean you should.