Key Takeaways from Wealth Management EDGE and the “AI Assembly”

21 May 2024

Embracing Change and AI in Wealth Management

The Wealth Management EDGE event, specifically the WealthStack component, is a wealth management conference that brings together industry-leading brands such as Inside ETFs+, WealthStack, and RIA Edge. This event is designed to empower financial advisors and professionals with real-world solutions to enhance their investment strategies, technology, and practice management. After analyzing the key takeaways from the WealthManagement EDGE event, it is evident that advisors need to embrace change, capitalize on new technologies, and move away from traditional strategies like referrals.

I had the fantastic opportunity to participate in the “AI Assembly” track and share insights around the role of AI within wealth management. Our panel, “Navigating the AI-driven Future of Wealth Management” provided insights on how to effectively utilize new technologies to drive growth, enhance daily workflows, and gain a clear understanding of the industry's future direction. We talked about how leading advisors are putting AI technology to use in their practices to drive growth against the regulatory backdrop and some of the risks and pitfalls to avoid while utilizing AI.

I was pleased to share some market context of AI in the industry:

AI, or Artificial Intelligence, is a broad field of computing that focuses on creating machines or models capable of solving complex problems that typically require human intelligence. It encompasses various types of AI that have evolved over time. For instance, in the 1960s, early NLP (Natural Language Processing) models were developed to simulate basic conversations. Over the years, AI has advanced to include random forecast models that can predict optimal actions and more recent advancements like GPT-4, a powerful LLM (Large Language Model). GPT-4 can process an impressive 25,000 words within seconds, demonstrating a deep understanding of language nuances and generating sophisticated responses.
There are two common types of AI: Discriminative and Generative. Discriminative AI has been deployed in asset and wealth management for years, with typical applications focused on predictive analytics that can support use cases like “next best action”. In contrast, Generative AI, which is enabled by a new class of powerful models such as LLMs, are relatively new and are just beginning to be implemented within the industry.
- The output of Discriminative AI – call it, “the detective” – classifies or predicts the next outcome.
- The output of Generative AI – call it, “the artist” – is novel content generation in a variety of mediums (e.g., text, data, image, code, etc.).
- Large Language Models (LLMs) can be considered a subset of Artificial Intelligence (AI).
Celent’s Dimensions: Wealth Management IT Pressures & Priorities 2024 report and webinar shared our findings from our global survey of wealth management executives where we asked about their IT Spending Priorities and Pressures. 60% of wealth managers in the survey are leveraging GenAI in some capacity and 32% believe GenAI will be a top three technology by expected impact over the next five years. It is largely the Tier 1, larger wealth managers, who are experimenting with and deploying GenAI.

In this blog, I will discuss the key takeaways from the event, with a specific focus on the AI track, and how it can shift wealth management practices:

Embracing Change: One of the main themes that resonated throughout the Wealth Management EDGE event was the need for wealth management firms to adapt and embrace change. The industry is evolving rapidly, and those who de-prioritize innovation, risk falling behind. Speakers emphasized the importance of staying updated with the latest trends, technologies, and investment strategies to better serve clients and remain competitive in the market.

Leveraging AI in Wealth Management: The AI Assembly showcased the immense potential of artificial intelligence in transforming wealth management practices. AI-powered tools and algorithms can analyze vast amounts of data, identify patterns, and provide valuable insights to advisors. This technology enables advisors to make more informed investment decisions, personalize client experiences, and streamline operational processes. The event highlighted the importance of integrating AI into wealth management practices to enhance efficiency and deliver superior client outcomes.

Personalization and Client Experience: The AI track emphasized the role of AI in delivering personalized client experiences. By leveraging AI algorithms, advisors can gain a deeper understanding of their clients' needs, preferences, and risk profiles. This enables them to tailor investment strategies and recommendations accordingly, fostering stronger client relationships and trust. Firms spoke about various AI-driven tools and platforms that can enhance the client experience, ultimately leading to better outcomes and increased client satisfaction.

Compliance and Risk Management: Another key takeaway from the AI Assembly was the role of AI in compliance and risk management. With increasing regulatory requirements, wealth management firms need robust systems to ensure compliance and mitigate risks. AI-powered solutions can automate compliance processes, monitor transactions for suspicious activities, and identify potential risks in real-time. The event highlighted the importance of integrating AI into compliance and risk management frameworks to enhance efficiency, reduce errors, and ensure regulatory compliance.

Collaboration and Learning: Lastly, the Wealth Management EDGE event emphasized the significance of collaboration and continuous learning in the wealth management industry. The AI track provided a platform for professionals to exchange ideas, share best practices, and learn from industry experts. The emphasis on collaboration and learning underscores the importance of staying connected with industry peers and continuously upgrading skills to stay ahead in a rapidly evolving landscape.