The wealth management industry has certainly embraced AI. According to a Wipro survey, 44% of firms have already integrated AI extensively into their operations. Extensive AI users predicted the technology would transform client relationships within two years of the report, which was released last September.
But like any new technology, the hype rarely matches reality. While AI does offer exciting possibilities, companies should not rush into the technology blindly. Firms should identify specific goals they want AI to solve, ensure the quality of data that powers AI, and provide protections for client privacy. In addition, companies should rigorously vet the myriad of AI vendors that claim their products can essentially perform miracles.
Firms can’t ignore the vast potential of AI. At the same time, technology without structure, purpose or clarity of thought is just mere technology.
Hype Versus Reality
Experts say the AI has already helped firms improve but the industry faces a long road ahead to fully realize the technology’s potential.
“AI has the potential to unleash real enterprise-wide transformation, but we are in the early innings,” said Michael Wood, CEO of Domify. “The industry is beginning to move from chat-bots and co-pilots in service of customer success to embedded AI co-workers that drive down core operational costs and drive exponential business growth. It will be a journey, but one that will unfold quickly.”
Sid Yenamandra, Founder and CEO of Surge Ventures, said, “AI in wealth management is often hyped as a game-changer, but real-world adoption is slower due to regulatory, ethical, and data challenges. While AI enhances efficiency and insights, firms must navigate implementation hurdles, ensuring compliance and human oversight for meaningful results.”
Practical Uses For AI Now
“We believe AI can enhance back-office efficiency, compliance and regulatory communications as part of a larger holistic system,” said David Knoch, CEO of Docupace. “We’ve been working to integrate the most promising elements of this technology into our systems and have seen interesting preliminary results.”
However, Sindhu Joseph, Co-Founder and CEO of CogniCor, believes the industry has not been aggressive enough in unlocking the full value of AI. Firms have been deploying the technology to relatively simple tasks.
“While it can save time and money, point solutions like an AI-enabled note taker or scheduler will not directly result in firm expansion,” Joseph said. “More importantly, it does not allow the technology to deliver on its potential – it’s like driving an F1 car to pick up groceries.”
She recommends agentic AI for tasks, such as onboarding and money movement, “working together to streamline operations and help advisors prioritize actions to take advantage of growth opportunities. Not only does this allow advisors to bring on more clients, it could help identify meaningful growth within existing accounts.”
Key Steps To Effectively Implement AI
Babu Sivadasan, Co-Founder and CEO of JIFFY.ai, said that for implementation of AI, firms “must have a champion who is accountable to drive adoption of AI and have access to the executive team for regular updates and sync up.”
“Firstly, firms must identify use cases aligned with strategic goals across growth or operational efficiency and not vice-versa where they try to fit an AI solution into their ecosystem,” Sivadasan said. “Once they have use cases identified, set measurable goals and set up a time horizon to realize these goals.”
Joseph agreed. “Identifying specific goals AI can help achieve is an important preliminary step,” she said. Rather than a goal of implementing AI at a firm, management should want to enable advisors, employees and clients to do certain actions.
“Ensuring the AI solution has built-in processes in place to verify and trace results – both for regulatory and accuracy purposes – should be at the forefront of firms investing in AI solutions,” she added.
Primary Risks Firms Will Encounter
“Primary risks include data privacy breaches, regulatory non-compliance, biased algorithms, and over-reliance on automation,” Yenamandra said. “Firms must implement strong data governance, ensure transparency in AI decision-making, conduct regular audits, and align AI use with ethical standards. Maintaining a human-in-the-loop approach mitigates unintended consequences and enhances trust.”
Wood said firms must constantly ensure the security of their data, using tools such as in-house AI deployments. “Over time, model responses may drift, so monitoring and frequent user audits are important,” he said. “All AI outputs should be explainable, with source data citations to ensure no biases creep in.”
Evaluating AI Vendors
“In addition to evaluating their technical capabilities, approach, choice of AI architecture, and ability to protect your data, it’s still important to ask the business basics,” Wood said. “Are they solving a real business problem? Is there a clearly articulated ROI? Does the partner understand my business and the outcomes we are pursuing? AI is a means to an end, not the end itself.”
Yenamandra listed some red flags firms should keep in mind: “Lack of transparency, poor data security policies, generic AI solutions not tailored to wealth management, and reluctance to provide case studies or references.”
Communicating With Employees And Clients
AI will inevitably replace some jobs performed by humans, but there are mitigating factors, including new job opportunities that will unfold as AI becomes commonplace. Also, firms will always need the human factor, especially with managing client relationships.
“Leadership must make it clear to employees about how this initiative will elevate their quality of work,” said Sivadasan. If employees are displaced, he suggests leaders plan for retooling or cross training employees to work on new opportunities. “Also, they must share the bigger picture and benefits to the larger organization and not make it a siloed initiative.”
“Leaders should be honest about the process,” Knoch said. “A properly applied AI strategy will reduce the need for human capital to develop, review and execute regulatory compliance functions, engage in routine account paperwork or other critical administrative tasks.”
“However, there has been a chronic shortage of these professionals across our industry, and by being honest, we can focus on using the efficiencies found to drive growth without stoking fears.”
Larry Roth is CEO of Wealth Solutions Report and Founder and Managing Partner of Ascentix Partners.
