The author of this article – a chief executive of a large tech firm working with wealth managers – elucidates the various ways AI is, and will be, changing the sector.
The future has arrived, and we must grasp the opportunities
and the significant responsibilities, argues the author of this
article: Karl Roessner, CEO, Vestmark. (More on the author
below.)
AI is shaping up, arguably, to be the dominant
non-geopolitical topic of the year for wealth management. And the
editors are pleased to share these thoughts from the chief
executive of a large US firm very much in the center of
technology. The usual editorial disclaimers apply to the views of
guest writers. To respond and enter the conversation, email
tom.burroughes@wealthbriefing.com
and amanda.cheesley@clearviewpublishing.com
Artificial intelligence is poised to be the magic wand that
transforms the entire lifecycle of financial services, from the
first handshake with a client to the intricate balancing act of
wealth management. By harnessing the power of AI, financial
advisors, who already juggle multiple roles, can now wield a
treasure chest of resources at lightning-fast speed. When AI
is the digital companion, service can soar to new heights, making
the realm of wealth management as accessible and efficient as a
well-oiled machine. Industry outlook remains positive: According
to the 2024 Accenture AI in Wealth Management Report, nine out of
10 financial advisors believe that AI can help grow their book of
business organically by more than 20 per cent.
As AI technologies become more integrated into financial
services, however, it’s essential to lead with trust. This
involves ensuring that AI solutions are reliable, transparent,
and aligned with your firm’s values. Trust in AI signals
responsibility and, by emphasizing this, wealth management
firms can strengthen their reputation for reliability and
integrity.
The road ahead promises real gains for financial advisors who
stand at a pivotal moment for AI adoption. With a growing client
base and an impending wealth transfer, advisors face increasing
demands. By supplying AI with access to a vast body of
information, including client portfolio details and client data,
there is an immense opportunity to improve service levels at
scale. The future is here, and it’s up to us to understand the
possibilities as well as the great responsibility that comes with
new technology.
Freedom from friction
AI will revolutionize wealth management, but most importantly, it
is expected to elevate personalized client service at scale and
reduce complexity for the advisor. At present, “personalization”
as an advisor begins with taking a standard template – such as
portfolios, financial plans, or risk tolerance questionnaires –
and modifying it using information gathered from the client to
better fit their needs. Technology enhances the customization of
traditional offerings, leading to more complex and bespoke
products and experiences.
However, increased configurability and flexibility can create
complexity, causing friction for advisors and slowing down
personalized client offerings. Direct indexing serves as a prime
example: Direct indexing adoption is hindered by advisors’
difficulty in explaining its benefits clearly to clients. Here,
AI can step in. AI-driven tools can simulate personalized
scenarios, helping clients grasp the benefits of direct indexing
tailored to their unique financial goals.
These interactive tools also allow clients to explore different
potential outcomes. Complexity is reduced for the advisors in
these examples because AI can distil complex concepts into
succinct, meaningful communication from advisor to client.
AI, particularly the rise of agentic AI, where the generative
capabilities of large language models are combined with “chain of
thought” reasoning and API-based tools, fundamentally changes the
landscape. Imagine a scenario where, instead of advisors needing
to know and understand all the capabilities of their software, a
helpful AI copilot – an expert in the tools available – can
execute tasks and provide recommendations on how best to meet
client needs. For instance, if a client is concerned about the
tax implications of transitioning from an ETF to a Direct
Indexing portfolio, an advisor might spend days manually building
and analyzing proposals.
However, just as AI can clarify the value of direct indexing, the
AI copilot can instantly handle such analysis, presenting results
within seconds. This allows advisors to stay in control of wealth
management while leveraging AI to manage complex tasks
efficiently and enhance client service across many portfolios,
all while maintaining the highest quality of analysis and
communication.
Trust, transparency must drive AI
While advisors and client service representatives can use AI
assistants to generate responses to complex questions, when it
comes to customer data, privacy and security are paramount. AI
adoption must prioritize data privacy and protection. As firms
integrate AI into their operations, it is vital to prepare
clients for an AI-driven world by emphasizing data security. At
present, the financial services industry is grappling with unique
challenges in adopting AI due to stringent regulatory constraints
and concerns over privacy and client data.
Financial institutions handle vast amounts of sensitive client
information, and there are strict contracts outlining how this
data can be used. By keeping AI processes within secure
environments, such as internal platforms, we can prevent data
breaches and unauthorized data sharing.
Additionally, using agentic AI ensures that the AI executes tasks
within the confines of the software, mirroring the actions an
advisor would normally take. This means that the AI cannot
“invent” new methods for building or rebalancing portfolios – it
can only perform tasks allowed by the software. There is always a
risk of errors, both AI and humans can make mistakes. However,
when technology solutions come with established methods to
identify and correct these mistakes, wealth managers will find AI
much more helpful as well as accessible.
AI will not replace human advisors but will augment their
capabilities to navigate and serve in an increasingly complex
financial industry. The human touch remains irreplaceable,
especially during times of market stress. Clients value the
reassurance of speaking with knowledgeable advisors who can guide
them through complex financial decisions.
AI will not only enhance advisors’ effectiveness but also
transform how they use technology and meet client expectations.
By taking the right steps and implementing AI solutions
judiciously, the industry can harness the benefits of AI while
maintaining the trust that is critical to wealth management
relationships.
About the author
Karl Roessner is the CEO of Vestmark, a provider of portfolio
management solutions and outsourced services for financial
institutions and their advisors.