The Impact of AI on Wealth Management

ChatGPT and artificial intelligence

Ever since OpenAI released its AI-powered chatbot, ChatGPT on November 30th, 2022, the world of artificial intelligence has been accelerating at an exponential rate. At this point, it’s still unclear exactly how AI is going to disrupt different industries. But, the technology is simply too advanced and impressive to not have widespread effects. This article will go into detail on AI in finance, the future of AI, and its impact on wealth management.

Despite its recent popularity, artificial intelligence actually dates back to 1957 when the concept was first presented at the Dartmouth Summer Research Project on Artificial Intelligence. However, the topic of AI has gained enormous momentum in recent months thanks to ChatGPT. 

ChatGPT is an AI-powered chatbot that uses generative AI to naturally process queries and respond in human-like language. The biggest differentiator between ChatGPT and other AI tools is its ability to answer questions and tackle tasks just like a human does. 

This sophisticated tool can help provide answers to questions and assist you with tasks, like composing emails, essays, and even writing code. Its scarily-good responses helped it amass 1 million users in just 5 days after launching. By this point, it has well over 100 million users. 

In its current state, it’s still unclear how the future of AI will disrupt different industries. While ChatGPT, and its successor GPT-4, are highly impressive there are still a few areas where they fall short. With that said, let’s examine the role of AI in wealth management as it currently stands.

AI in Finance: Pros and Cons

As it relates to finance, there are dozens of ways that ChatGPT and other large language models (LLMs) can help. However, ChatGPT is also far from a perfect tool and it’s important to understand its limitations.

Benefits of AI in wealth management:

  • Analyzing large volumes of data: LLMs thrive when it comes to analyzing and drawing conclusions from large data sets. This type of analysis can help with risk reduction, investment decisions, and rebalancing portfolios (note: sensitive client information should never be entered into ChatGPT or other AI chatbots).
  • Automating manual tasks: Another key way that ChatGPT can help financial institutions is by automating manual tasks such as data entry, risk analysis, and client onboarding. Any task that has to be done repetitively can likely be outsourced to AI.
  • Brainstorming: Another advantage of AI is its ability to offer fresh ideas and perspectives. For example, you can ask ChatGPT-specific questions about how to strategically grow your business and it will provide ideas for growth, usually in a step-by-step format. The same functionality applies to marketing, customer onboarding, sales, accounting, etc.

Limitations of AI

With that said, there are still significant limitations of AI:

  • Lack of real-time data: ChatGPT still lacks real-time market data which will limit its queries and analyses.
  • Doesn’t understand financial jargon: The fact that ChatGPT doesn’t always understand industry-specific terms can hold the tool back if you are planning to use it for highly-specific financial analysis. 
  • Difficulty explaining its reasoning: ChatGPT has been criticized for presenting false information as fact. With this in mind, leaning on it to completely handle a task without fact-checking it is still inadvisable. On top of that, it could have biases in its training that will influence its answers and analysis.
  • Concerns over data privacy and security: ChatGPT and other LLMs are cloud-based applications. Because of this, you should not input sensitive data, such as customer information, into these tools.
  • Not yet a replacement for humans: Despite AI’s prowess, it’s still unable to replace human intuition and complex decision-making. In the wealth management space, complex decision-making and intuition play major roles in day-to-day operations.

At this stage, the biggest thing to be aware of is that AI is likely not going to replace key operations of wealth management institutions quite yet (or anytime soon). However, many jobs will likely warp over the coming months and years to incorporate the use of AI. For example, AI usage in wealth management will likely lean on new tools so financial advisors can provide better client engagement and help them streamline time-intensive tasks such as gathering research, finding potential assets, or identifying patterns in the market.

Additionally, the role of AI in finance is going to change incredibly quickly and it’s important to stay attuned to any changes to ensure that you’re maximizing your efficiency and output.

AI Wealth Management: Use Cases

If you’re in the wealth management space, there is undoubtedly room to use AI to improve your business. Here are a few specific use cases for AI wealth management:

  1. Conduct needs analysis: AI tools can be used to help you navigate a needs analysis with potential clients. By asking ChatGPT a few questions before your conversation with your client, it can help uncover new ideas for questions to ask and what details to be aware of.
  1. Create engagement plans for clients: AI is also incredibly useful when it comes to putting together engagement plans. For example, you can use AI to create written engagement plans other team members can use as a reference when engaging with HNW individuals.
  1. Sheets and Docs Integration: ChatGPT already integrates with Google Sheets and Docs to help automate your tasks while using these tools.

Looking Forward

At its current stage, the general consensus is to treat ChatGPT and GPT-4 like an intern with an MBA. It’s fairly sophisticated and it will be able to provide relief in certain areas. However, you also shouldn’t assume that it will automatically be able to handle every request, nor should you entrust it to do so. 

With that said, having access to comprehensive client account data and investment information from a reliable source can also be a game-changer for fueling artificial intelligence models. This is where BridgeFT comes into play. BridgeFT’s wealth infrastructure platforms gives our users access to countless investment data sources, complex calculations, and analytics to fuel ChatGPT models–all through a modern, API-first platform.