Artificial intelligence in wealth management

Wealth management is an activity that consists in carrying out an analysis of a client’s assets as well as his profile, with the aim of managing his assets in the most optimised way possible. Traditionally, this mission is entrusted to professional advisors specialized in this field. However, the rise of artificial intelligence is not sparing wealth management, which is increasingly being transformed by the automation of its activities and especially by the arrival of intelligent objects.

The company Xerfi, which presents itself as an « independent publisher of economic sector studies[i] » whose mission is to enlighten the various companies in the field of economic information in the digital age, in particular big data, published on 13 April 2017 on the levers for optimizing business models in the context of wealth management.

Although not directly focused on the integration and use of artificial intelligence in the wealth management universe, the study examined the relevance of this hypothesis by explaining that intelligent objects could be extremely useful. Firstly, they would improve knowledge of potential customers by collecting data on these customers. The analysis of this data would indeed make targeting customers much more effective, especially at the advertising level by offering them products or services tailored to their needs.

Moreover, intelligent tools would accentuate the automation of financial advice, in particular thanks to robo advisors. Finally, artificial intelligence would be able to develop advanced reasoning that would constitute valuable assets for wealth management professionals.

About robo advisors, also called FinTech for « financial technologies », they can be defined as automated internet platforms using big data and artificial intelligence technologies to ensure the management of a portfolio or the optimization of client investments[ii]. Unlike human advisors, robo advisors are not reserved for the highest portfolios and can cost up to five times less than the latter.

Moreover, they are much easier to use and much more accessible than human advisors, since their clients can access them at any time from the Internet.

This makes robo advisors very attractive for savers whose income is too modest to justify a possible recourse to a human asset manager, but also for young people. For example, an IFOP study « Café de la Bourse on young people’s savings and their interest in innovative investments », we note that nearly half of young working people under 40 who can afford to save a minimum amount of money and therefore generate savings consider themselves potentially ready to make an investment for a so-called « new generation » life insurance policy, that means one that is taken out online and can be managed by a robo advisor[iii]

Robo advisors were born in the United States in the 2000s and today represent a significant market. In fact, the two main players in the US market, Betterment and Wealthfront, have respectively 7 billion and 5 billion outstanding.

Although the United States is far ahead of European countries in the use of this new type of advisor, it can be noted that some European companies are beginning to look at the profitability of robo advisors. This is the case, for example, of BNP Paribas AM, which in September 2017 acquired a robot advisor called Gambit, designed by a Belgian company and intended to operate within BNP Paribas’ retail and private banking networks[iv].

Another example is Nutmeg in the United Kingdom, whose turnover in 2016 was $3.5 million in 2016[v]

However, some reservations are expressed regarding these robo advisors. Firstly, the approach of having all of one’s assets managed by an artificial intelligence system without the possibility of dialogue with a human advisor seems to limit the enthusiasm of potential clients, including young people, to make use of it. Moreover, it should be recalled that the success of robo advisors comes mainly from their financial cost compared to the rates currently offered by asset management professionals, and the risk is that they only represent solutions adopted out of spite and not out of true conviction regarding their skills.

Perhaps the most cost-effective solution would be to put artificial intelligence at the service of wealth managers. This was done by US Bank, which multiplied its conversion rate by 2.34 using Salesforce’s Einstein platform[vi].

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