Is AI set to take over asset management for the rich?
In the future, Artificial Intelligence (AI) will be responsible for the bulk of wealth management, and the AI technology of tech giants such as Google and Facebook will be deployed in making the rich even richer, says David Wilson of Capgemini Global Financial Services.
A Capgemini survey reveals that 56.2% of HNWIs (high-net-worth individual – people with assets of at least S$1million) would consider using financial services offered by the tech giants. However, this is highly unlikely entirely to squeeze out the role of human wealth managers, as the wealthy mostly place a premium on having trusted advisers to call on.
Almost 80% of wealth management companies anticipate tech company market entry
Now that they have embarked on the development of AI technology, it would not be hard for the tech giants to capitalise on their vast stores of personal data to offer high-calibre wealth management advice. They have exhaustive knowledge of the retail and social experience of Internet users worldwide.
Applying AI to this vast databank would enable the tech giants to offer the rich highly-customised advice, David Wilson told CNBC.
According to the Capgemini survey, wealthy clients secured an average return of 24.3% through asset managers in 2016, with an average return of 33.0% in Asia excluding Japan, and 31.3% in South America.
It is interesting that, despite these stellar returns, the majority of these wealthy clients would consider using wealth management services offered by the tech giants. What they are interested in is hybrid wealth management services that combine human and AI input.
The Capgemini survey does not precisely define what is meant by wealth management, but our reading of the report suggests a broad definition of services focused on wealth management, rather than simply asset management in the narrowest sense.
AI wealth management: another tool for enriching the rich?
Apple, Google, Facebook and Samsung have already entered the financial market with payment services. It would hardly be surprising if, as David Wilson predicts, they were to capitalise on their data and technology to expand into wealth management.
Indeed, 78.3% of wealth management companies participating in the Capgemini survey anticipate that tech companies will enter the wealth management market.
Does this spell the end for human wealth managers?
Less than 60% of HNWI wealth management clients said they were satisfied with their wealth manager, with less than half (48.7%) satisfied with the level of fees they paid. This would seem to provide an opportunity for low-cost, high-precision AI managers.
However, David Wilson notes that whilst they are, of course, interested in financial gain, wealthy clients also like to build a relationship of trust with the wealth managers they work with and to receive highly personalised advice.
We conclude that, even if AI-based wealth management becomes the mainstay, these clients are likely to continue to value human advisors, and that AI technology will remain no more than another tool for them to use in their work of further enriching the rich.