AI adoption among wealth management firms grew 23% since 2023, driven largely by RIAs and large wealth management firms, according to F2 Strategy’s recent AI trends report.
Smaller RIAs are accessing AI technology via vendor relationships while larger institutions are taking a “DIY/build in-house approach,” the report notes.
Benefits reported in the survey include cost savings, improved insights, more preparation for client meetings, more time for other activities and a reduction in “not in good order” (NIGO) forms.
“There are clear benefits of AI use in the industry to streamline operations and allow advisors more time to build stronger client relationships,” said Doug Fritz, F2 Strategy Co-Founder and Executive Chairman.
But he added, “While RIAs have embraced the disruptive technology, we’re concerned that the bank trust sector will fall even further behind in its ability to compete for client relationships.”
Only 23% of bank trust firms reported active AI initiatives versus a whopping 95% of RIAs, the report says. Of the 74% of firms that reported using AI, about 80% are RIAs or hybrid RIAs, the report says.
Multifamily offices are, like RIAs, also embracing AI, according to Bryce Carter, Director and Head of Client Engagement at F2 Strategy.
Echoing Fritz about bank trusts, Carter said in a video provided with the report at F2’s website, “We’re concerned that they might be falling behind on their competitive curve and not really jumping into this.”
Carter added: “We’re seeing immediate low hanging fruit [in] advisor efficiency tools like note taking and meeting prep.”
“In these two years wealth management had identified use cases for AI in automation, predictive analytics, and more,” according to the report.
Another key finding of the report is that respondents understanding of AI “boomed” in the past two years, increasing 22%. Sixty percent rate their AI understanding at 6/10 or higher now, the report says.
More than 60% of firms are also “confident in their ability to implement their AI initiatives successfully,” the report says.
“As they implement AI, firms report they still want a deeper understanding of how to balance compliance regulations, train staff on new tools, and monitor AI’s usage within the firm,” according to the report.
“Firms report they still want a deeper understanding of how to balance compliance regulations, train staff on new tools, and monitor AI’s usage within the firm,” according to the report.
F2 urges firms that still feel uncertain about AI to “reach out to your peers or third-party consultants to learn how other firms have found success with AI.”
Routine business processes are also a “prime target” for use cases in wealth management, according to the report. “AI is assisting advisors with note taking and meeting preparation tools; low-hanging fruit that provides meaningful value,” the report says.
It adds: “The number of firms using AI tools to structure disparate unstructured data is gaining. AI tools speed up the time to deliver compliant messages from advisors to their clients and eliminate the bottleneck on the compliance desk. Tools using optical character recognition (OCR) create efficiencies in alternatives data processing. There is an opportunity to use natural language processing (NLP) to analyze trust documents.”
Wealth management firms are using platforms that support estate and tax planning with AI assisted tools, the report also points out.
Noting that “many tools aim to solve a specific niche,” F2 urges firms to “think critically on how your tools can interact within an ideal connective state. Avoid getting caught with a number of niche tools that are duplicative and make your world more complex.”
The last key finding of the report is that predictive analytics was the only area to decrease in importance over the past two years, while interest in generative AI, NLP and workflow automation increased.
The data in the report was generated from a survey conducted by F2 Strategy in April. The survey included responses from 42 RIAs, wealth management firms and broker-dealers representing $6 trillion in assets, F2 says.
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
