It is anticipated that generative AI can revolutionize the operations of wealth management firms. The utilization of AI, in collaboration with other AI techniques, is said to be a powerful agent in this regard, according to PwC. BlackRock and Morgan Stanley are prominent companies that have taken on AI.
Generative artificial intelligence has made its way to Wall Street, and industry leaders anticipate it will drive a major shift in the way firms manage their operations. While AI, such as natural language processing and machine learning, has been already used by asset and wealth management firms for a while, the use of generative AI in conjunction with other technologies will further increase its potential, according to Roland Kastoun of PwC. He described it as "a massive accelerator of productivity and revenue growth for the industry." A study conducted by McKinsey & Company has estimated that the banking sector stands to gain some $2.6 to $4.4 trillion annually in value with the implementation of generative AI. While not the largest beneficiaries, asset management and wealth management are likely to see $59 billion and $45 billion respectively.
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Some of the biggest players are already on board. At the start of this month, BlackRock sent out a memo to staff stating that it will provide generative AI tools through Aladdin and eFront to customers in January. The memo said that this "GenAI" will change how people use technology, ramping up productivity and refining customer interactions. In September, Morgan Stanley released its own AI assistant for financial advisors, the AI @ Morgan Stanley Assistant. According to co-President Andy Saperstein, the AI's launch is expected to revolutionize client relationships, boost advisor efficiency, and help financial advisors devote more time to providing service. Additionally, JPMorgan and Goldman Sachs both announced that they are developing their own ChatGPT-style AI. JPMorgan's IndexGPT will leverage "cloud computing software using artificial intelligence" in order to pick securities that meet customer requirements, while Goldman has asserted that its AI technology will generate and evaluate code.
Wells Fargo analyst Mike Mayo has said that those who do not adapt to AI will be left behind as a result of the competitive marketplace that it creates. This is especially pertinent as younger investors make their investing decisions as they will be looking for more digitization, personalization, and affordable fees. According to William Blair analyst Jeff Schmitt, firms and advisors need to use AI to make their services more desirable to this upcoming generation of investors, as they are expected to possess $72.6 trillion in wealth to transfer between 2025 and 2045.
Kastoun from PwC noted the advantage of generative AI over other types of AI which is its capability to generate content. He said that analyzing data is one thing while generating new material is something else and is making the technology highly sought-after. Kastoun also believes that combining different forms of AI will create an even bigger impact in the industry. At T. Rowe Price, their New York City Technology Development Center has sought out to create AI capabilities and recently embarked on an adventure with generative AI. The center head, Vinarub, is aiming to use this tech to better support the business and in the span of six months have moved from researching and proof of concept to creating an internal application to help with the investment process.
Facing a shift towards generative AI, not only big firms are responding; smaller upstarts are also looking to shake up the industry. Wealth-tech firm Farther, co-founded by Brad Genser, is one such disruptor. According to Brad, Farther is "a new type of financial institution" that couples expert advisors with AI. He believes that finding success in the industry requires a combination of the two: "If you build people processes and technology together, you get something that's greater than the sum of its parts." On that same note, Magnifi, an investing platform, employs ChatGPT and computer programs to provide personalised investing advice. The company has already amassed over $500 million in assets across 45,000 subscribers. Tom Van Horn, Magnifi's chief operating and product officer, described the platform as a "copilot" that assists customers in achieving their wealth objectives.
The speed at which technology is advancing means it can be hard to anticipate what the future might bring in terms of applications. Yet, as productivity gains ground, advisors have more time to devote to their clients. Kastoun of PwC noted that this development could significantly alter the way businesses are structured. Moreover, experts point out that the focus should be on having people use the technology, as opposed to it replacing them entirely. Wells Fargo's Mayo went on to indicate that the ideal scenario would be for everyone to have an AI partner or colleague, and for each customer to be supported by an AI agent—with both people and AI powering the relationship. Michael Bloom of CNBC contributed to this report.
Correction: This article has been updated to indicate that according to Magnifi, some 45,000 subscribers have connected over $500 million in aggregate assets to the platform. A previous version of the article misstated the amount of assets.
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