There are numerous possibilities for using generative artificial intelligence (AI) in the wealth management space, ranging from back-office operations to financial planning. Adopting generative AI for wealth management can deliver value through increased efficiency, time savings and reduced costs.
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Understanding Generative AI
Generative AI is a type of artificial intelligence driven by machine learning. Machine learning refers to how computers “learn” from algorithms and model inputs to generate predictive outputs.
If you’ve ever used ChatGPT, you’ve used generative AI. ChatGPT is trained to analyze large datasets for language patterns, which it then uses to generate answers to questions or prompts in text form.
Generative AI tools can also learn from other types of content in addition to text. For example, gen AI models can “read” image files, audio and video files or HTML code to produce predictive content in different forms.
Generative AI for Wealth Management Use-Cases
Generative artificial intelligence has far-reaching potential for wealth management firms, so much so that it’s frequently characterized as being “revolutionary” or “transformational.” Here are some of the most significant impacts generative AI may have for wealth managers who are willing to test its capabilities to drive growth.
1. Forecasting and Predictive Analysis
Generative AI models are equipped to analyze and organize vast amounts of data in much less time than it would take a human advisor to do so. That speed and efficiency can allow wealth managers to approach forecasting and predictive analytics in an entirely new way.
For example, gen AI tools make it easier to:
- Conduct sentiment analysis based on real-time market data
- Identify emerging trends and evaluate potential outcomes
- Produce more accurate forecasts using larger, more complex datasets
- Analyze multiple outcomes to choose the most appropriate path for clients
These types of capabilities enable you to be proactive, rather than reactive, when sudden market shifts occur.
2. Content Creation
Generative AI tools like ChatGPT are designed to produce content that’s both accurate and human-sounding. That’s huge, as content creation can take up valuable time in your busy schedule.
In terms of what you can create using gen AI models, there are plenty of options.
- Client communications, including direct mail and email newsletters
- Internal communications
- Social media and website content, such as blog posts or landing pages
- Lead magnets
- Charts
- Video scripts for training or promotional materials
- Templates
- Compliance reports
- Sales copy for digital ad campaigns
Human review is certainly still a necessity for content created through generative AI. But having generative AI create an initial draft for you can yield substantial time savings, so you can direct your time and energy elsewhere.
3. Portfolio Optimization and Financial Planning
Wealth managers can use generative AI to optimize client portfolios and create personalized financial advice, based on predetermined inputs such as risk tolerance and investment goals.
Clients get a better user experience and potentially better investment results. That can lead to greater satisfaction and more referrals for you. You may also have opportunities to increase sales with existing clients using AI-prompted recommendations for additional products or services.
Generative AI can be particularly helpful as a risk assessment and risk management tool, too. These tools can simultaneously analyze historical market data and current trends to assess specific risks, such as credit risk or inflation risk.
4. Back Office Operations
One of the best uses of generative AI for wealth management may be in the back office. Generative AI tools can help you to:
- Automate repetitive (and time-consuming) tasks
- Reduce the amount of manual work you and your staff normally undertake
- Increase speed and efficiency in processing data
- Minimize room for human error
The most successful wealth management firms understand the value of dedicating time and energy to the highest ROI tasks, while streamlining the back office as much as possible. When you allow gen AI to handle the more tedious aspects of running your business, you have more time to focus on engaging with clients and meeting their needs.
5. Compliance and Security
Compliance and cybersecurity are critical areas of focus for wealth managers and financial advisors. Failing to meet compliance requirements can result in fines and penalties, which may damage your brand reputation. A cyberattack that exposes sensitive data, meanwhile, could result in a loss of client trust.
There are several ways generative AI can help advisors keep up with compliance and cybersecurity requirements, such as:
- Monitoring compliance trends and changing regulatory guidelines
- Conducting routine risk assessments to identify potential violations or areas where your firm is at risk of non-compliance
- Assessing your firm’s cybersecurity measures to identify potential threats or targets that may be at risk of a cyber attack
- Creating simulated cybersecurity incidents to test your firm’s response plan
Strong compliance and cybersecurity policies can strengthen your brand reputation and credibility, which can help attract more clients. The clients you already have, meanwhile, may be more likely to remain loyal to you when they feel that their information is secure.
Frequently Asked Questions (FAQs)
What Is the Downside of Generative AI?
Generative AI for wealth management is not a perfect technology, and there are some potential drawbacks to weigh. Some of the most notable arguments against the use of generative AI in wealth management include the potential for misuse or abuse of these tools, ethical concerns about bias, lack of accountability and the potential for data privacy breaches.
How Can AI Help Asset Management?
Asset managers can use generative AI and other AI tools to increase efficiency and accuracy when analyzing data. AI models can help asset management firms increase value for clients, which can lead to increased sales and revenues.
Will Wealth Managers Be Replaced By AI?
Artificial intelligence is intended to be a support tool for wealth managers, rather than a replacement or substitute for human financial advice. Wealth managers can utilize AI in many ways to provide better experiences for clients and more personalized advice while streamlining their firm’s operations and managing costs.
Bottom Line
Where does generative AI fit into your firm’s growth plans? It’s an important question to ask as AI technology’s use continues to expand. While there’s likely to be a bit of a learning curve at first, it may be to your advantage to consider how gen AI could help shape your business’s future.
Tips for Growing Your Advisory Business
- Is your digital footprint as large as you’d like it to be? If you’re trying to gain new clients, but aren’t getting the exposure you’re after, it could benefit you to work with a dedicated advisor marketing platform. SmartAsset AMP offers a holistic marketing approach to help you get connected with leads. Schedule a demo to learn how you can leverage it to grow your business.
- Keeping up to speed on AI trends can give you a competitive advantage. Tuning in to financial advisor podcasts or AI podcasts can help you keep a finger on the pulse of what’s happening in the space where financial services and tech meet.
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