ExoBrain was at the Investment Association annual conference this week, exploring the role of AI in asset and wealth management. As the sector grapples with geo-political uncertainty, flat revenues, rising costs, and shifting consumer preferences, many see AI as one of the most promising responses.
The UK investment industry plays a vital role in driving economic growth by allocating capital to businesses. However, the sector faces significant challenges, including the shift to lower-margin products like exchange-traded funds (ETFs), an advice and engagement gap that means that many groups in society are not investing or taking control of their long-term financial security.
AI and blockchain-based fund tokenization are emerging as tech engines that could help address these issues. While most firms plan to adopt AI, the technology is still in its early stages of implementation. Currently, AI is being used in areas such as investment research, legal drafting, marketing, contact centres, and fraud detection, as well as to drive operational efficiencies. Increasingly, AI is also moving into investment roles where fund managers can analyse risk, optimise portfolios, automate trade idea generation to enhance returns, and streamline their workflows with the use of the latest AI models plus market data.
Regulators recognise the potential benefits of AI but are keen to ensure that it doesn’t introduce bias, concentration risk, or reduce the resilience of the sector. In the UK and US, there is a preference for guiding AI use through existing outcome-based regimes rather than rushing to introduce new regulations, as the technology is evolving faster than new rules can be developed.
Takeaways: Asset management firms should prioritise strategic investments in AI to drive efficiencies, improve decision-making, and enhance customer engagement in the next generation of investors. However, they must also work closely with regulators to ensure responsible and transparent use of the technology, uprating their risk frameworks accordingly. By embracing AI while maintaining a focus on customer outcomes, the industry can position itself for success in the face of changing market dynamics.