17/04/2024
The advancement of artificial intelligence (AI) achieved in recent years has resulted in a stream of eye-catching headlines as well as growing public awareness of the abilities of this technology, ranging from improved medical diagnostics to doing your homework (just to clarify, a human wrote this article!). With some claiming that AI will herald the next industrial revolution – with all the transformation and disruption that may entail – it’s no wonder that companies critical to the AI ecosystem, such as Nvidia, are seeing their share prices boom.
AI is already an important theme on investor radars and is helping to fuel recent portfolio performance. But looking behind the scenes, what could it mean for the way that professional financial advice is delivered? Answers to this question are already emerging from our research studies – both regular and bespoke – and it’s sure to be a topic we investigate in greater depth in the coming years.
In Q4 ‘2023, the increasing use of AI in the asset management industry was the third most-expected industry change cited by retail intermediaries interviewed for our European Fund Selector Study in France, Germany, Italy and Switzerland (with fee pressure and growth in sustainable investment the first and second topics). Those who spontaneously mentioned this topic were broadly positive in their reasons, be it in how asset managers serve them, or how their own business models adapt.
“I think AI and new quant technologies will start to play major roles in portfolio management, with asset managers taking on more of a monitoring role.” Private banker, Switzerland
“I can see robo-advisers and investment algorithms offering more customisation to clients, especially those with lower assets who just get allocated to the same model portfolio as thousands of others.” Financial adviser, Italy
We conducted a survey at the beginning of 2024 for Professional Paraplanner, including questions on the potential future role of AI in the paraplanning process. In response to the question “Do you think that in 2024 we will see technology, such as AI, used to take more of the ‘admin’ out of the paraplanning/administration process” just 25% of the 100+ respondents selected “yes”, but 49% opted for “not this year but maybe from 2025 onwards.”
A significant majority of paraplanners believe that the introduction of AI could have a transformative impact on their work, but most explanatory comments on their thinking also clarified that they expect the impact to be beneficial, but more limited than the ‘hype’ around AI might suggest. Many comments focussed on the efficiency gains that AI could bring about, freeing up paraplanners to focus more time on more complex work such as planning and client goals, and ultimately improving client service.
“I am all for it. I think client experience and understanding is top priority, and tech/AI will play a large part in helping with that.” Paraplanner, UK
Many comments however highlighted the importance of the human touch in the paraplanning process, presenting natural limits to the penetration of AI. There remains an AI trust deficit – be it in terms of data protection or confidence in machine-generated work. There is also a sense that AI will be unable to build and maintain the strong client relationships crucial to financial advice and client experience, and struggle to offer the level of personalisation needed, especially for clients with more complex needs.
“I think it will have its uses, but I don’t think it will replace the ability of a person to analyse a situation and really understand the soft facts.” Paraplanner, UK
Taken together, the responses from European intermediaries and British paraplanners suggest a reasonable level of openness from most to the integration of AI-driven tools in the asset management industry, and positive potential outcomes for industry practitioners and end-investors alike. But this is clearly a topic that merits a deeper exploration and ongoing tracking. Stay tuned for a follow-up article, where we’ll discuss the results of an upcoming survey of British retail intermediaries on their current and anticipated use of AI.
If you would like further information on the types of research and insight that we can provide to help you drive your business forward, please get in touch with Mick Hrabe or Richard Ley and we will be delighted to help. You can also call us on +44 (20) 7104 2235.
