Time to reinvent

Back then is passé

For many years, the wealth management industry was characterised by stability, both in terms of performance and the consistency of talent and processes. This era is over and the wealth management industry is facing many challenges. Geopolitical risks, rising inflation, an omnipresent shortage of skilled labour, negative market dynamics and other pressures are presenting the wealth management industry with ever more demanding tasks and changing the behaviour of its key stakeholders. The expectations of all stakeholders are rising: investors, employees, supervisory authorities and society. At the same time, new technologies such as generative AI and blockchain are revolutionising the world of work. Finally, assets are increasingly ending up in the hands of younger investors - so-called millennial millionaires - who expect lower fees, efficient information exchange, better value for money and customised solutions. There is no way around radical change. The only question is: how?

In pole position for AI

Advances in generative AI are leaving no stone unturned, even in the asset management industry. A comparison with other industries shows that generative AI can be used particularly profitably here (see Figure 1). Although the industry has only moderate potential for increasing profits, it is also subject to only minor disruption. The implementation of AI tools is comparatively simple in asset management, which is why it is in an excellent position to do so. Provided that asset management firms identify the best use cases and seize the opportunities.

Figure 1: As an industry with little disruption, asset management is predestined for rapid success with AI.

Creating more value from data

The applications of generative AI are endless, from operations, finance, research and analytics to risk management, sales, investment relations, compliance and operations. A closer look at the asset management value chain reveals that some areas of business are better suited to rolling out AI-based tools than others (see Figure 2). The most promising areas of application are in investment research, the processing of investment transactions and investor relations. Generative AI can create added value here. For example, it can be used to generate, verify and monitor investment decisions.

Topic with a strategic-cultural dimension

According to a global survey by PwC, almost 90% of the institutions surveyed believe that the use of disruptive technological tools (big data, AI, blockchain and others) will lead to better results and returns in their portfolio.¹ In 2023, 16% of CEOs in Switzerland have implemented generative AI in their organisation; globally, it was twice as many.² This reluctance has cultural and structural causes. Compared to the start-up attitude in regions of the world such as Scandinavia, North America or Asia, Swiss CEOs display a fast-follower behaviour. When it comes to new technologies such as cloud solutions or generative AI, they are rarely the first on the market. However, they keep a close eye on markets, customers and competitors. By delaying the introduction of innovations slightly, but introducing them soon, they provide their products with greater customer benefits and benefit from lower costs at the same time.

Know how

An international comparison provides information on which use cases are currently very popular with asset managers. Examples of possible applications are briefly described below.

Conclusion

New technologies such as generative AI are rewriting the rules of the game in the wealth management industry. They offer wealth management firms interesting opportunities: With sophisticated AI applications, they can optimise data quality as the basis for their risk and investment decisions, strengthen client relationships with complete real-time information and accelerate their responsiveness to regulators. Ultimately, they eliminate errors and increase their operational efficiency. To realise this potential, it is worth leading the way and identifying those areas of application that are truly cost-effective. A solid foundation for this is a suitable framework for the responsible use of data.

¹ See "PwC Global Asset Wealth Management and ESG Research Centre", 2023

² Cf. Swiss edition: "27th Annual Swiss CEO Survey", PwC Switzerland, 2024