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Artificial intelligence is expected to reshape the wealth management industry — and those who don’t embrace the technology are at risk of falling behind, experts believe. Those in the younger, digitally native generation are now aging and growing their wealth. They expect more digitization and personalization, so wealth management firms are turning to AI to meet those needs, William Blair analyst Jeff Schmitt said in an Oct. 20 note. Despite early skepticism, advisors now realize that AI can be an effective tool in improving their practices and augment — not replace — human interaction, he said. “Wealth managers that are adapting to this changing landscape by implementing and scaling AI technologies are best positioned to capitalize on these demographic trends and should see greater market share gains and profitability in the coming years,” he wrote. Artificial intelligence has been around for several years already within wealth management, with advisors using technology such as machine learning and natural language processing to help analyze data, said Roland Kastoun, U.S. asset and wealth management consulting leader for PwC. Now, that technology combined with generative AI can really help grow productivity and revenue, he said. Already big names such as Morgan Stanley , BlackRock and JPMorgan have all implemented generative AI solutions . “There are going to be opportunities to invest that don’t currently exist,” said Wells Fargo analyst Mike Mayo. “There is one out in the top of the first inning and it is hard to say exactly who wins.” However, on a broad scale he sees JPMorgan as the clear frontrunner right now. “JPMorgan does seem to have the digitization, the data, and the maturity of processes to deploy AI in ways that many others cannot,” Mayo said. They also can attract more talent, which will be key, he added. JPM YTD mountain JPMorgan year to date Meanwhile, Charles Schwab is Schmitt’s top pick for 2024. While he believes the stock is well positioned to outperform due to the potential for a significant earnings rebound, he is also bullish on Schwab’s AI capabilities. The wealth management firm is the largest, with $8 trillion in client assets, and has been using its scale and technology to build artificial intelligence focusing on improving customer service, Schmitt wrote in his note. “While Schwab continues to build out core AI capabilities, we believe this will accelerate over time as it looks to remain an industry leader in customer service levels and pricing,” he said. Among the other names Schmitt also has overweight ratings on are Morgan Stanley, Ameriprise Financial and Envestnet . In September, Morgan Stanley unveiled its generative AI assistant for financial advisors to help “revolutionize” client interactions and bring new efficiencies, the firm said in a memo to staff. Envestnet, the largest provider of wealth-tech solutions for advisors in the U.S., is in the early stages of AI adoption, but has the resources to continue enhancing and scaling its AI capabilities, Schmitt said. Meanwhile, wealth-management company Ameriprise has been working on its AI software over the last few years to streamline operations, augment advisor productivity and boost customer service, Schmitt added. Veteran tech investor Paul Meeks particularly likes BlackRock, which he thinks will benefit as AI pushes more investors into passive investing over active. State Street, Invesco and Schwab can also benefit from that continued shift, he said. The larger institutions, such as Morgan Stanley and Goldman Sachs , will also leverage the technology, said Meeks, a professor at the Baker School of Business at The Citadel. “AI can be used for not only creating an asset allocation for a client and maybe even driving some security selection but also for their marketing,” he said. AI can very inexpensively and efficiently reach a much larger audience, he added. He’s not necessarily jumping into bank stocks right now, however. “When interest rates start to fall, we will get a double whammy — the benefit from the AI trend and the benefit from falling rates,” he said. — CNBC’s Michael Bloom contributed reporting.
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