Wealth managers insist AI can work in their favour

{"text":[[{"start":5.8,"text":"When US-based fintech company Altruist revealed a new AI tool in February aimed at personalising investment strategies, shares in global wealth managers tumbled. "}],[{"start":16.15,"text":"St James’s Place, the UK’s largest wealth manager, fell more than 13 per cent on the day, along with rivals including Quilter and DIY investment sites such as AJ Bell. Swiss banks Julius Baer and UBS were affected, along with brokers in the US."}],[{"start":34,"text":"Although stocks quickly recovered, the sector-wide plunge demonstrated how concerned investors are about the threat posed to parts of the industry by advances in technology. The concern was that AI could deliver financial guidance and advice, replacing existing services. "}],[{"start":50.2,"text":"But the industry has hit back, arguing that people’s financial lives are often complicated and nuanced, noting that people tend to value human input rather than rely solely on technology. Rather than replacing human-led services, wealth and asset managers believe AI is improving their operations. The risk, they argue, is that those who do not adopt it could lose their competitive edge."}],[{"start":null,"text":""}],[{"start":73.85,"text":"Mark FitzPatrick, chief executive of St James’s Place, says the sell-off reflected “angst generally about AI” but adds that technological changes are actually beneficial in many cases."}],[{"start":85.94999999999999,"text":"FitzPatrick says SJP, which works with 5,000 financial advisers, is poised to benefit from AI because of the “massive retirement wave” of older advisers in the coming years. "}],[{"start":98.14999999999999,"text":"“AI will enable advisers to be more productive and see a lot more clients than they do today,” he says, noting that AI is helping advisers by cutting paperwork and time spent on data entry, reducing their overall workload by about a fifth. “I do not believe that it is going to replace advisers, because clients are . . . buying trust and peace of mind,” he adds. "}],[{"start":119.85,"text":"More broadly, fund groups — which invest money on customers’ behalf and often work with wealth managers — say they are also benefiting from AI. "}],[{"start":128.95,"text":"“Both wealth managers and asset managers are looking at it . . . how they can use AI to drive efficiencies,” says Dan Hall, UK and Ireland wealth and asset management leader at EY. "}],[{"start":null,"text":""}],[{"start":140.5,"text":"“The bigger and more established managers can use their scale as an advantage in the early days to invest in tools and technology to enable deeper and broader research, using a wider range of data sources,” Hall adds. "}],[{"start":153.5,"text":"AI is mostly used by asset managers for research, although it is increasingly being implemented to help with the broader investment process. "}],[{"start":160.95,"text":"Nick Cherney, head of innovation at Janus Henderson, says portfolio managers are building agents to start to capture a wide range of data from investor sentiment to portfolio manager bias. “Eventually all of these pieces will be seamlessly integrated into traditional quantitative risk systems to give a far more comprehensive, real-time view to portfolio managers of the intended and unintended risks in their portfolios,” he says."}],[{"start":186.14999999999998,"text":"“We have about 18,000 meetings with company management teams a year,” says Kenneth Vanderpool at Wellington Management, an asset manager. “AI can help us go through notes on these meetings and distil insights. We also have an internal chatbot, called Welly, that can answer our questions across internal research and external sources.”"}],[{"start":206.09999999999997,"text":"In terms of investment processes, he says the company is running experiments with AI to help recommend trading ideas to its fund managers and help assess risk in portfolios."}],[{"start":216.24999999999997,"text":"“No AI has the ability to submit trades or make direct investment decisions, though — it’s a support tool,” says Brian Barbetta, co‑leader of Wellington’s technology team."}],[{"start":227.19999999999996,"text":"According to a recent study by technology company SimCorp, 70 per cent of buy-side companies — those which buy investments on behalf of clients — are successfully employing AI to support their investment managers and sales teams. This marks a significant increase on last year’s 10 per cent that were actively exploring AI tools. "}],[{"start":249.04999999999995,"text":"A survey by Edelman Smithfield, conducted in March, found 79 per cent of the 300 professional investor respondents always or frequently use AI for research on companies in which they are seeking to invest, while 77 per cent always or frequently use it for risk management. "}],[{"start":266.34999999999997,"text":"The question of whether AI will replace human fund managers might not seem immediately pressing, but it is a topic that some companies are exploring. "}],[{"start":275.45,"text":"Cherney believes that there could be a time in the future when fund managers’ performance is measured against that of the best AI model. Janus Henderson is already building customised AI agents, he says, which can reason and take action to help with the due diligence process when assessing private markets deals. Previously someone would have had to manually go through it all, he adds."}],[{"start":295.7,"text":"Debasish Patnaik, a senior partner at consultancy McKinsey, says cost reductions are another crucial benefit. “For an average asset manager, McKinsey estimates that AI . . . could ultimately affect the equivalent of 25 to 40 per cent of the cost base — but only for firms willing to redesign workflows, not just automate individual tasks.”"}],[{"start":null,"text":""}],[{"start":316.95,"text":"Patnaik adds that early adoption of agentic AI shows an improvement in productivity of 3-5 per cent annually. "}],[{"start":325.4,"text":"“The managers who will be most exposed are those whose process is replicable — those whose edge comes primarily from reading the same material as everyone else and expressing a fairly conventional view,” he says."}],[{"start":337.15,"text":"“The managers who will be most durable are those exercising genuine judgment in conditions of uncertainty, sizing conviction and being accountable for difficult calls,” he adds. “AI is not abolishing that kind of judgment. It is simply making the market much less forgiving of anything that only resembles it.”"}],[{"start":363.04999999999995,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1777898211_2563.mp3"}