The use of generative artificial intelligence (AI) on Wall Street is set to revolutionize the way firms conduct business. While AI technologies such as natural language processing and machine learning have been utilized in wealth management and asset management firms for years, the addition of generative AI has the potential to further enhance their impact. Experts, including Roland Kastoun, U.S. Asset and Wealth Management Consulting Leader for PwC, believe that the integration of generative AI with other AI technologies will significantly accelerate productivity and revenue growth within the industry.
According to McKinsey & Company, the banking sector, including asset management and wealth management, presents one of the largest opportunities for generative AI integration. The McKinsey Global Institute’s analysis suggests that generative AI could add an annual value ranging from $2.6 trillion to $4.4 trillion across 63 use cases. Although not the primary beneficiaries within banking, asset management and wealth management could see $59 billion and $45 billion in value, respectively.
Several major players in the industry have already embraced generative AI. BlackRock, for instance, plans to introduce generative AI tools for Aladdin and eFront in January. These tools will assist users in navigating simple queries. Morgan Stanley launched its own generative AI assistant, AI @ Morgan Stanley Assistant, in September. Its co-President, Andy Saperstein, believes that generative AI will revolutionize client interactions and drive efficiency within advisor practices.
JPMorgan and Goldman Sachs are also actively developing AI technologies in-house. JPMorgan’s IndexGPT aims to utilize cloud computing software with AI to analyze and select tailored securities for customers. Goldman Sachs, on the other hand, focuses on generating and testing code.
As the younger generation matures, there is an increasing demand for digitization, personalized solutions, and reduced fees. Wealth management firms and advisors must leverage AI to meet the evolving expectations of digitally native investors, who will control a significant share of invested assets in the coming years. Failure to embrace AI would result in falling behind competitors who successfully utilize AI technologies, as highlighted by Wells Fargo bank analyst Mike Mayo.
Generative AI stands out from other AI technologies due to its ability to create original content. While traditional AI can analyze extensive sets of data, generative AI utilizes existing data to generate new content, igniting a wave of excitement. However, the wealth management and asset management sectors are not exclusively relying on generative AI. The combination of diverse AI technologies and methodologies across the industry is particularly impactful, as highlighted by Roland Kastoun from PwC.
Firms are now exploring how to integrate generative AI into their existing AI technologies and business models. T. Rowe Price’s New York City Technology Development Center has been developing AI capabilities for several years and recently made a significant shift to incorporate generative AI into their internal applications. Similarly, smaller upstarts like Farther and Magnifi have taken on the challenge of disrupting the industry through their unique combination of expert advisors and AI technologies.
The rapid evolution of generative AI makes it challenging to predict future use cases. However, as productivity continues to increase, advisors will be able to invest more time and effort in engaging with their clients. This, in turn, could lead to reevaluating existing business models within the industry. Experts emphasize that generative AI should complement human efforts rather than replace them. The ideal scenario is for every employee to have an AI copilot or coworker, while each customer benefits from an AI agent, as envisioned by Wells Fargo’s Mike Mayo.
Generative AI presents an exciting new frontier for the wealth management and asset management sectors. By integrating generative AI with other AI technologies, firms have the opportunity to enhance productivity, improve customer experiences, and gain a competitive edge in the industry. The adoption of AI is not merely a choice but rather a necessity in order to keep pace with evolving investor demands. Embracing generative AI and harnessing its potential will undoubtedly shape the future of wealth and asset management.