Wealth management is currently facing significant challenges, and it is becoming increasingly apparent. According to research conducted by the Boston Consulting Group (BCG), the global wealth is projected to soar to an astounding $329 trillion by the end of 2027. This remarkable growth is fundamentally reshaping the industry, creating a landscape of both opportunities and obstacles.
With the continuous surge in global wealth, high-net-worth individuals are increasingly demanding personalized and digitized offerings from wealth management firms. Failing to meet these expectations could jeopardize firms’ long-term survival in this fiercely competitive landscape. Not only that, wealth managers and firms are also drowned in other internal challenges. Let’s dive into these challenges and find out how GenAI can help overcome them.
Automating manual tasks
The wealth management industry is riddled with tasks that often demand extensive manual effort and are prone to human error. However, Generative AI presents a promising solution by automating many of these tasks, thereby freeing up valuable time for wealth managers to concentrate on more critical responsibilities. For instance, wealth managers dedicate approximately 26.7 hours per week to engaging directly with clients. These meetings take up around 8.8 hours per week, with an additional 5.3 hours spent on preparation. This preparation involves creating comprehensive client overviews, developing investment proposals, and preparing suitability reports. Additionally, wealth managers spend approximately 6.6 hours per week on financial planning, investment analysis, and addressing analytical client inquiries.
GenAI offers a powerful solution for automating meeting preparation and handling client queries. With its ability to swiftly and accurately analyze vast amounts of data, it saves wealth managers countless hours of manual research and analysis. As a result, wealth managers can dedicate more time to nurturing client relationships, unlocking greater efficiency and effectiveness.
Winning new clients without additional support
The next most time-consuming task for wealth managers is getting new clients. RFP support, DDQ (due diligence questionnaire) support, and KYC reports all take up the bulk of the managers’ time. With GenAI’s automated solution, wealth managers can now dedicate more time and resources towards acquiring new clients without the burden of additional support tasks.
For instance, when there is a need to enhance KYC reporting, GenAI tools can effortlessly scan the client database, accurately identify, and update KYC documentation. Additionally, it can thoroughly analyze and scan these documents, promptly flagging any discrepancies for further action by a human reviewer.
Enhancing client experience
Clients’ beliefs and values are changing and environmental, social, and governance (ESG) factors are becoming crucial to meet their new expectations. Instead of spending more time establishing ESG preferences for new clients, wealth managers spend very little time, according to a report by Oxford Risk . One of the key benefits of Generative AI is its ability to personalize recommendations for ESG investments based on the client's individual preferences and risk tolerance. By using machine learning algorithms, generative AI can analyze a client's past investment history and behavior to identify patterns and preferences that may be relevant to their current ESG preferences. This can help wealth managers make more informed decisions, resulting in better outcomes for their clients.
Improving compliance
Improving compliance is crucial for various reasons. It encompasses meeting regulatory obligations, satisfying investor demands for highly customized investment management agreements (IMAs), and navigating complex investment types, including strategy replication and derivatives growth agendas with intricate calculations. These demands collectively emphasize the increasing need for automating investment compliance.
Generative AI can help wealth managers automate the process and overcome these challenges. By leveraging machine learning algorithms, GenAI can quickly analyze vast amounts of data from various sources and identify potential compliance issues in real-time. This technology also can learn from past patterns and make recommendations on how to improve future compliance processes.
Moreover, generative AI can enhance portfolio transparency by providing a holistic view of investments across different asset classes, strategies, and geographies. It can also flag any discrepancies or outliers that may require further investigation. This level of transparency enables wealth managers to make more informed decisions and take proactive steps toward achieving a new level of compliance.
Tapping into new growth opportunities
According to a survey conducted by BCG , a significant 63% of female respondents expressed the need for their wealth managers to enhance their value proposition. The investment industry continues to grapple with an ongoing issue, where products originally designed for men are simply repackaged with marketing efforts aimed at attracting women.
By leveraging the hybrid work between GenAI and personal interactions, wealth managers have the opportunity to create a diverse range of portfolios that align with the preferences of female investors, thus creating an advantage to win more clients in this segment.
Becoming a market front-runner
In conclusion, Generative AI can help wealth managers navigate the challenges of the industry in many ways, from automating tedious tasks to providing personalized investment advice. Wealth managers who embrace Generative AI are better equipped to face the challenges of the industry and deliver better results for their clients. And as the demand for wealth managers grows, their time becomes increasingly limited. Only by deploying GenAI can wealth managers truly differentiate themselves from their competitors and become market front-runners.
Getting started with GenAI with the right questions:
When incorporating GenAI, firms must ask themselves these crucial questions. The responses will vary based on the company's current business model, available resources, and skillsets. However, at their essence, these questions aim to guide firms towards weighing long-term outcomes against short-term gains, especially concerning technology investments.
1. Which functions are suitable for automation? Can we prioritize them based on value metrics such as time savings, increased capacity, error reduction, and efficiency gains? What about complexity factors like scope, size, and variability?
2. Do we have the appropriate operating model to effectively incorporate analytics-driven functions?
3. Do we have the right individuals to lead and develop a technology-driven approach?
4. Should we develop the necessary capabilities in-house or consider acquiring them?
5. How can we ensure we stay updated on the deployment of emerging technologies and solutions by regulators, peers, and FinTechs, so we stay ahead of the curve?
Not sure where to begin? Contact us and we'll do the rest!
.png)
