The financial industry is in the midst of unprecedented change. Many big banks and entrenched institutions are directing their IT budgets towards the support of legacy systems written in COBOL. But customers clearly want something else: convenient, more efficient digital banking experiences. This is opening up a disruption opportunity for young FinTech startups that are harnessing cutting-edge developments in artificial intelligence (AI) and other emerging technologies.
Why Wealth Management Is Overdue for Innovation
Addressing support issues of old dusty systems that use COBOL is obviously a necessity. But it’s definitely not a viable business strategy for the near future. For this reason, Gartner predicts that 80% of established financial service firms may become obsolete by 2030 if they do not prioritize digital innovation. Put another way, if these companies want to maximize their returns on IT investments, then they should pursue innovation, not just system maintenance.
The writing has been on the wall for some time now. Take financial planning, for example. It was not long ago that these services were reserved solely for high net-worth individuals. That’s certainly no longer the case today. Wealthfront, SoFi, Betterment, and several other companies have commoditized access to personal financial advising through predictive analytics and the application of machine learning algorithms.
This abrupt change has left banks that still rely on human advisors in the lurch. After all, robo advisors are much more cost-efficient than traditional human brokers. In fact, Accenture estimates that these innovations can reduce the delivery cost of these services by as much as 70%.
Opening up personalized financial advisement to a broader audience has been key to attracting and retaining younger consumers that fall in the millennial and Gen Z age range. This makes sense when you consider the following point: 46% of consumers feel overwhelmed when it comes to their finances. If you empower them with the right tools that give them insight and control, then you can secure their loyalty for years to come.
By 2029, millennials will control the largest disposable income share. So companies that refine their strategies to cater to this young audience now will only benefit more in the long run.
How Financial Institutions Are Leveraging AI
Many industry insiders see Morgan Stanely as the leader in AI Advising. The NYC-based company recently launched WealthDesk, a platform that gives financial employees new tools and customer insights in real-time. This allows them to conduct advanced scenario analysis and find each client’s optimal investment strategy. And it could be just the thing that Morgan Stanley needs to thrive over the next decade.
Many trading platforms are also leveraging AI to augment their customer experience. For instance, E*Trade has been working on shifting from legacy data centers to a more agile cloud architecture. In turn, this frees up the company’s IT staff to dedicate more time to work on innovation. More automation and AI algorithms have been chief priorities for these projects. Among them, a conversational AI chatbot is in the works; it will not only guide younger investors but also help more seasoned ones monitor their trading activity.
That last sentence is especially vital to comprehend. One of the biggest appeals of robo advisors is that they fill financial literacy gaps for younger generations. This means that millennials and Gen Z customers can start planning their financial future better and faster. Accenture also notes that younger clients tend to gravitate towards digital solutions over in-person consultations when seeking investment advice.
Robert Golladay, a former Director of Strategic Accounts for Europe at enterprise AI software company CognitiveScale, thinks AI will play an integral role in determining success in the finance industry: “The winners in the wealth management space are probably going to use AI to understand how a person wants to be communicated with and marketed to.”
The Future of Wealth Management? Proactive and Ultra-Personalized
For many, the future of wealth management seems shrouded in mystery. But for some, it’s obvious that success will be determined by how well a company can deliver proactive, personalized, real-time support to investors of all calibers. Thus, big data analytics and machine learning will become essential tools in this competition, since they enable financial institutions to swiftly build personalized one-on-one rapports with each customer.
What else can we expect from AI besides ultra-personalized advice that’s tailored to each customer’s current needs and circumstances? Proactive guidance that continuously improves a customer’s financial knowledge will also be a key factor.
Since each customer is at a different stage of their lives, it’s also crucial that a financial company can support these various phases. Therefore, they should work curating selections of investment advice based on customer experience levels, preferences, and risk tolerances.
Lastly, every modern financial firm should have an omnichannel presence. Whether their customers choose to communicate with them via chatbots, mobile app, or in-person, the dialogue should be intuitive and immediate. After all, each of us may have a different preference for how we communicate with our banks, but we all like one thing: convenience.
It’s clear that AI will play a central role in the financial sector’s near future. Only this technology can enable personalization at scale alongside real-time insights. But as far as which financial services will come out on top? It’s probably best to leave the task of predicting that to AI as well.
Does your bank use AI? What qualities do you value most when selecting a financial institution to work with? As always, let us know your thoughts in the comments below!Tags: AI, AI and machine learning, AI and ML, AI app developers NYC, app developer nyc, app developers NYC, app development NYC, artificial intelligence, artificial intelligence app, artificial intelligence app developer, artificial intelligence app developers, artificial intelligence app development, financial innovation, financial technology, machine learning app developer, machine learning app developers, machine learning app development, wealth management