The AI revolution is reaching the investment industry. Embracing AI presents an opportunity to asset managers to be at the forefront when offering customized portfolios. AI's ability to analyze vast amounts of data, recognize patterns, and leverage alternative sources support asset managers not only to generate unique investment ideas but also uncover overlooked opportunities.
It is no secret to the asset management community that AI is transforming how advice is created for, delivered to and consumed by clients. According to a recent study by Accenture, 98% of all asset managers agree on this and 97% believe that AI can help grow their book of business organically by more than 20%. However, as of today, 50% of all investment managers acknowledge that their firms are challenged to act on their AI vision, 55% said that their firms’ AI tools and insights are too complicated to use, and more than six in 10 (64%) said their firm is taking on too many AI pilots at once in its push to adopt the technology.
“Against increasingly challenging market conditions, AI has the potential to help wealth managers sustain and drive new growth, create operating efficiencies and transform the customer experience through more hyper-personalized insights and products,” commented Scott Reddel, managing director at Accenture, leading the North America Wealth Management practice. “Now isn’t the time to take your foot off the pedal. Firms can overcome adoption speedbumps with continued commitment from management, focused applications that deliver business value, and — perhaps most critically — collaboration across business lines.”
Client driven technology demand
With expected more than $68 trillion being passed on to a younger generation in the coming years - known as the “great wealth transfer” - it is crucial for asset managers to be digitally savvy. According to the Accenture report “The New State of Advice”, Generation Z and Millennial investors were more than twice as likely as Baby Boomers to consider wealth products and services offered by tech companies (80% and 63%, respectively, versus 27%). In the same survey, more than 40% stated that a firm’s technology offering is key when it comes to selecting an advisor. Advisors using AI in their process not only have the ability to engage with clients through data-driven communications, but they also can customize and personalize strategies for each and every client. AI technologies can analyze client profiles, financial goals, risk tolerance, and market data to create personalized investment strategies. This automation allows wealth and asset managers to cater to individual client needs more efficiently and effectively, without the need for extensive manual analysis. By offering tailored investment solutions, wealth managers can enhance client satisfaction and retention.
Time and cost saving
By utilizing AI, asset managers can save time, enabling them to engage in more conversations with their clients. AI can automate routine and repetitive tasks, such as data entry, data analysis, and generating reports. By automating these processes, wealth managers can reduce manual labor and associated costs, saving both time and money. Moreover, AI can analyze large volumes of financial data and market trends at a much faster pace than humans. This enables wealth and asset managers to make more informed investment decisions quickly, leading to potentially higher returns and minimizing losses. Beyond this, AI allows managers to optimize portfolio allocations, fee structures, and transaction costs, reducing expenses for their clients, and thereby increasing overall cost-efficiency.
Generating new ideas
AI can generate data-driven new and unique investment ideas by leveraging its ability to process vast amounts of data and identify patterns, trends, and correlations that may not be immediately apparent to human analysts. Here's how AI can accomplish this:
- Data Analysis: AI algorithms can analyze large volumes of structured and unstructured financial data, including historical market data, company reports, news articles, social media sentiments, and more. By processing this diverse range of data sources, AI can uncover hidden insights and relationships that may lead to new investment opportunities.
- Machine Learning & Pattern Recognition: AI algorithms can learn from historical data and identify patterns that lead to successful investment outcomes. By training on past investment performance, AI models can generate new investment ideas based on similar patterns and historical trends.
- Natural Language Processing & Sentiment Analysis: AI can analyze textual data, such as news articles, social media or company reports, and extract relevant information such as sentiments that may impact investment decisions. By understanding, assessing and interpreting natural language, AI can generate investment ideas based on the insights derived from textual data.
- Alternative Data Sources: AI can leverage alternative data sources that are not typically used in traditional investment analysis. This includes satellite imagery, web scraping, sensor data, and more. By incorporating these unique data sources into its analysis, AI can uncover investment opportunities that may not be evident through conventional methods.
- Portfolio Optimization: AI can optimize investment portfolios by considering various factors, including risk tolerance, diversification, market conditions, and investor preferences. By analyzing large sets of data, AI can suggest portfolio adjustments or combinations of assets that may offer unique investment opportunities.
Overall, AI's ability to analyze large data sets, recognize patterns and leverage alternative data sources, enables asset managers to generate data-driven new and unique investment ideas. By augmenting human analysis with AI-powered insights, investment professionals can uncover opportunities that may have been overlooked and make more informed investment decisions.
Increase confidence of advice
AI adds confidence to an investment advisor's stock selection by leveraging its data-driven analysis and predictive capabilities. Through AI, vast amounts of financial data, market trends, and company-specific information can be analyzed and processed at an unprecedented scale and speed. AI can identify patterns, correlations, and indicators that may not be readily apparent to human analysts, providing a comprehensive and objective assessment of potential investment opportunities. By considering a broader range of factors and incorporating alternative data sources, AI can generate insights that enhance the advisor's understanding of the market, mitigate biases, and uncover hidden investment prospects. This augmented analysis empowers investment advisors with deeper insights and a higher level of confidence in their stock selection, ultimately aiding them in making more informed and potentially profitable investment decisions.
Time to act
To stand out and enhance their investment approach, asset managers should explore AI solutions. The impact of the AI revolution in institutional investment is gradually reaching the investment advisor industry. As highlighted in Deloitte's AI report, those who hesitate to adopt AI risk falling behind as the industry evolves towards a new standard. We at aisot are convinced that the future of asset management lies in combining the expertise of seasoned professionals with cutting-edge AI technologies. That's why we've developed the aisot AI Insights Platform.
