The potential of artificial intelligence in wealth management is huge. But do wealthy clients really want to do without personal advice?

By Georges Roten, Regional Head Switzerland and Liechtenstein

A survey by Avaloq of wealthy individuals in ten countries, including Switzerland, Germany and the U.K., has found that almost 30 percent of wealth management clients are considering changing their investment advisor. The majority of respondents want customized portfolios with personalized services.

At the same time, a surprising number of investors would leave some or even all of their advisory services to artificial intelligence (AI). One does not exclude the other in principle – quite the opposite. For the wealth management industry, these latest findings mean that the hybrid approach is gaining in importance.

Hard Factors

The internationally conducted survey took a closer look at the advisor-investor relationship. The basic conclusion is that investors are primarily concerned with cost efficiency and portfolio performance. 70 percent of those currently considering switching their advisors are concerned with such hard factors. Meanwhile, only one-third of all investors working with an advisor would consider changing them because of a lack of modernization.

However, this does not mean that technology is unimportant, it just shows that clients are less interested in the technologies themselves. The much more important aspect is how their daily lives are improved via the use of these technologies by investment advisors. Accordingly, financial institutions should not just introduce new technologies to be state-of-the-art, but use them in a way that specifically meets new digital client needs. With the right technological solutions, wealth managers can thus increase their scalability, transparency and efficiency, as well as offer a higher level of personalization.

Inflexible Proposals

Currently, many advisors still use data from disparate systems to personalize their investment propositions, which must be tediously copied into spreadsheets with manually created formulas. Others standardize certain proposal elements and use them for several clients. Both lead to inflexible proposals and a lot of work. In a market where innovative competitors offer creative personalized services, one thus runs the risk of losing out and with it both assets under management and clients.

AI provides a remedy here in many respects, as it can be used in a targeted manner but it should by no means replace the advisory function. Rather, the hybrid approach is now in high demand. Our study shows that both investors with an advisor and those who invest independently value AI-supported services.

Hybrid Approach in High Demand

The most popular service is the analysis of portfolio performance by AI. 54 percent of investors with an advisor and 56 percent of investors without an advisor would feel comfortable with AI support here. 33 percent and 24 percent respectively would even leave this task entirely to the machine. Also, product recommendations based on one's own behaviours as well as investment tips are suitable AI tasks.

However, the study also shows that only one in five investors would be prepared to leave various tasks entirely to AI. Therefore, the know-how of the investment advisor and the human component still count.

These are all the best prerequisites for a distinctive hybrid approach, towards which the wealth management industry should now decisively transform.

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