While six in seven North American wealth managers (84%) believe that artificial intelligence (AI) will transform their industry in the next five years, less than one-third (28%) are already scaling it today across their businesses, according to a new report from Accenture (NYSE: ACN).
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Where AI can create value in wealth management (Graphic: Business Wire)
The report, titled “From Experimental to Exponential – AI: Built to Scale in Wealth Management,” is based on a recent survey of 100 technology and business C-level executives at wealth management firms in the U.S. and Canada. It notes that instead of scaling AI, seven in ten (72%) are focused on either experimenting with the technology through siloed proof of concepts or deploying it across targeted business groups. In addition, six in seven respondents (85%) believe that the promise of AI within wealth management is currently more hype than reality.
However, wealth managers are willing to embrace AI, as four in five (79%) said they are eager to adopt AI tools that deliver improved efficiencies and enhancements. This comes against the backdrop of COVID-19, which has increased wealth customers’ demands for highly digitized experiences, as well as ongoing fee pressure and increased competition from investment banks, which seek wealth management’s more-stable returns.
The report suggests that respondents may be underestimating the long-term value of applying AI to transform the wealth management customer experience. Nearly two-thirds (65%) of respondents believe AI can create the most long-term value in the middle office (including investment management) or operations, whereas only 35% believe it’s in improving the client experience and engagement.
“The findings suggest that although wealth managers are eager to embrace AI, they largely haven’t been able to move beyond experimentation toward widespread organizational application at scale,” said Scott Reddel, who leads Accenture’s wealth management practice in North America. “They also appear to underestimate the long-term value of AI, coupled with data and analytics, to reinvent the client experience and empower advisors to have more personalized client conversations and sell the right products at the right moments in their clients’ lives.”
The report notes that AI presents tremendous potential to reimagine wealth management in five areas: always-on and tailored client engagement; a more personalized client experience; dynamic and customized product recommendations; improved efficiency by relieving advisors of routine tasks; and automation to reduce costs in the middle and back office. The report suggests that AI can unlock client insights that generate actionable leads and opportunities to help acquire new clients, improve cross-selling and manage client attrition.
Encouragingly, when asked how they are capturing the benefits of AI, three in five respondents said they use the technology to attract new clients (62%) or to increase client service (61%). In fact, more than four in five wealth managers (84%) believe that the client experience can be transformed in the next year through AI tools that can determine changes in client sentiment and augment the client relationship management process, enabling advisors to engage more with clients and provide a personalized experience.
Longer-term, Accenture estimates that around 30% of an advisor’s daily activities could be automated through AI. The industry sees strong potential in this use case, with half (49%) of respondents indicating they plan to deploy AI to automate routine, accounting and other support tasks for advisors.
According to the survey, a majority of respondents believe that AI will create less than a 20% improvement in cost savings (70%) or revenue growth (64%) in the first year. Still, the future is promising, as most believe there will be a 20% or more increase to both the top and bottom line in two to three years.
“Wealth managers have to embrace AI and data and analytics at scale to transform the digital wealth experience and the very nature of advice,” said Michael Spellacy, a senior managing director at Accenture and global capital markets industry lead. “The next generation of wealth only engages on a technological dimension. AI can enable financial advisors to bring better insights to clients and engage their full wealth and capabilities rather than the fragments they serve today.”
These findings align with global cross-industry research of 1,500 C-Suite executives Accenture conducted last year to understand success factors for scaling AI. AI: Built to Scale revealed that while 84% of C-level executives believe they won’t achieve their business strategy without scaling AI, only 16% have moved beyond AI experimentation to broader-scale deployment.
More information about the report can be found here: www.accenture.com/us-en/insights/capital-markets/wealth-management-artificial-intelligence.
To understand the state of AI within the wealth management industry, Accenture surveyed 100 technology and strategy executives from a variety of financial services firms in the U.S. and Canada, including banks and wealth brokerages, independent firms, private banks, fintechs and insurance wealth companies. The online survey was conducted in October 2020.
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Accenture’s Capital Markets industry group helps wealth and asset managers, investment banks and exchanges rethink their business models, manage risk, redefine workplace strategies and improve operational efficiency to prepare for the digital future. To learn more, visit https://www.accenture.com/us-en/industries/capital-markets-index.