Wealth Managers Are Better at AI Than They Think

Survey research suggests wealth managers lead in deploying artificial intelligence successfully while other sectors still struggle.

Illustration by RIA Intel

Illustration by RIA Intel

Accenture interviewed 100 C-suite executives in wealth management last year and found many are skeptical of artificial intelligence. Eighty-five percent said its impact is “more hype than reality for businesses today.” Still, 60% of them are already using AI in their organizations and they’re doing it so well that other industries could learn from them, according to a new report.

“Understanding the application of AI to business requires an understanding of context — strategy, customers, company culture, and so forth. One application worthy of study across organizations is wealth management,” Babson College professor Tom Davenport and NewVantage Partners founder and CEO Randy Bean, wrote in the MIT Sloan Management Review.

Davenport is the President’s Distinguished Professor of Information Technology and Management at Babson College, the co-founder of the International Institute for Analytics, a Fellow of the MIT Initiative for the Digital Economy, and a Senior Advisor to Deloitte Analytics. Bean started NewVantage Partners, a strategic advisor on business data to Fortune 1000 companies and industry leaders, in 2001.

“Our survey research suggests that while many organizations have challenges with production deployments of AI, wealth management is a clear exception.”

That was one takeaway after Davenport and Bean completed their ninth annual Big Data and AI Executive Survey, which included 19 healthcare and life sciences companies and more than 50 financial services companies, such as Bank of America and Charles Schwab. Fourteen other consumer or business services companies and some governments also participated, including McDonald’s, Walmart, Bloomberg, and New York City.

An openness to use AI is differentiating wealth managers, despite their skepticism.

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Across industries, “forging a data culture” and “creating a data-driven organization” were bigger barriers to using AI than the technology itself, according to the survey.

“These are extraordinary results. They strongly suggest the need for change in the focus of data

executives toward programs that address data culture, literacy, and decision-making — even at the expense of technology initiatives. We have noted several senior data leaders who are now emphasizing the creation of data-driven cultures, but we do not see enough of them and we are not sure their efforts in that direction are sufficient,” the authors wrote in their report.

Financial advisors are using AI to pick stocks, uncover hard-to-find bonds, and identify common characteristics of existing clients so they can seek those out in prospects. Last year, Charles Schwab partnered with a third-party AI company to analyze 2.5 million phone conversations with RIAs. In January, Broadridge revealed AI software that it says can alert wealth managers of clients planning to leave with remarkable accuracy.

AI in wealth management has hardly been a total success. Some companies have spent millions of dollars on programs that fell flat. RIAs, almost all of which are tiny compared the wealth managers surveyed by Davenport and Bean, sparsely use AI.

But a decade ago, “big data and AI were nascent capabilities which received minimal investment” and that has changed.

“The function of a Chief Data Officer was non-existent, except within a small handful of companies. In those instances, the role was mainly structured around risk mitigation and regulatory compliance,” Davenport and Bean wrote in their 2021 report.

“During the past decade, Big Data and AI have become mainstream.”

Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.

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