A new report from PwC indicates that artificial intelligence is set to become increasingly important in the wealth and investment world.
According to the firm’s 2024 Global Asset and Wealth Management Survey, 80 per cent of asset and wealth managers believe that disruptive technologies – such as AI, generative AI, blockchain, big data and cloud computing – will fuel revenue growth in their organisations.
Almost three-fourths (73 per cent) say that, among these disruptive technologies, AI will be the most transformational over the next two to three years.
Whether it’s used to enhance trading strategies, improve decision-making or analyse data, AI is seen as an opportunity for firms to innovate, expand into new markets and democratise access to investment products for their clients. Eighty-four per cent of those surveyed believe AI will improve their operational efficiency; 72 per cent say it will improve their productivity – saving time spent on administrative work and resulting in more time for their clients.
[See also: Why HNWs are right to be worried about the threat of deepfakes]
AI: A game-changer
A previous PwC analysis highlighted that AI is a ‘game-changing technology’, and the current report emphasises that disruptive tech can allow a client’s objectives, risk appetite and capacity for risk to be analysed more quickly and in a more customised manner.
Wealth and asset managers can use AI to collect and share data more quickly and effectively – nearly 60 per cent are currently adopting or considering big data analytics for their investment operations. The technology can be used to analyse a client’s portfolio in order to recommend investments based on their risk tolerance, financial goals, personal circumstances and retirement plans, and gather and analyse data on companies to inform investment decisions.
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Preparing for the ‘great wealth transfer’ is also a factor; with trillions expected to pass to younger investors over the coming years, wealth and asset management firms are conscious that this new cohort of HNW and UHNW investors are digitally savvy and already au fait with AI. They will expect high levels of tech-enabled engagement, experience and hyper-personalisation from their financial advisers; more than seven out of 10 asset and wealth managers (72 per cent) believe that disruptive tech will lead to a shift in customer preferences towards tech-enabled solutions.
[See also: Will ChatGPT be the death of fund managers?]
Further indicating that financial service providers are likely to increase their focus on AI, 81 per cent say they are contemplating strategic partnerships, consolidations or M&A to enhance their firm’s technological capabilities and build an ‘extended tech ecosystem’ – perhaps kickstarting a new phase of industry consolidation.
‘Disruptive technologies such as AI are transforming the asset and wealth management (AWM) industry and fuelling revenue growth, productivity and efficiency,’ says Albertha Charles, global asset and wealth management leader at PwC UK. ‘Market players are subsequently looking to strategic consolidation and partnerships to build tech-driven ecosystems, break down silos in data management and transform their service offerings ahead of a great wealth transfer that will see mass affluents and younger audiences play a greater role in shaping service demands.’
[See also: How should UHNWs protect against the risks of AI?]
PwC’s report surveyed 264 asset managers from 29 countries and territories. Other findings include:
- Global assets under management held by asset and wealth managers is expected to hit $171 trillion by 2028, a compound annual growth rate of 5.9 per cent. Alternatives are projected to grow at a rate of 6.7 per cent, to $27.6 trillion by 2028.
- AuM in tokenised investment funds (including mutual funds and alternatives, excluding mandates) is forecast to increase from $40 billion in 2023 to more than $317 billion by 2028, growing at a compound annual growth rate of more than 50 percent. The increase is driven by the need for heightened liquidity, improved transparency and broader investment access, especially within alternative funds such as private equity, real estate, commodities and other non-traditional assets.
- As investors’ interest in digital assets increases, crypto remains their preferred choice. When asked what products have shown the highest demand from investors over the past 12 months, asset and wealth managers cited cryptocurrencies ahead of investments in digital asset technology companies, stablecoins, security tokens, central bank digital currencies, blockchain based projects and NFTs.
