Stableford Capital Insights

AI And The Impact On Private Wealth Management

Artificial intelligence (AI) has made remarkable strides in recent years, transforming many industries with its innovative solutions. Private wealth management is no exception. Many wealth management firms already utilize AI in some capacity, and recent surveys show that 62% of business and technology professionals at wealth management firms intend to increase spending on emerging technologies over the next 12 months.Stableford Capital has been monitoring and discussing AI’s potential impact on the financial world for a long time. As exciting as the opportunities are for artificial intelligence, there will be challenges in bringing supplemental AI to fruition, such as inconsistent access to clean, permissioned data across institutions.While it’s difficult to predict the future of private wealth management; we believe that leveraging emerging technology and AI to streamline and support a client-focused, active investment strategy will have significant advantages.

What is Generative AI?

Generative AI refers to a type of machine learning technology that creates content based on user prompts and the collection of information that has been inputted. Unlike earlier AI systems that primarily make predictions based on previously detected patterns, generative AI is able to create new content.The potential of AI tools is immense. Their capabilities are rapidly expanding; Industry experts expect them to be an integral part of the wealth management industry in the future, assisting with a variety of cognitive tasks.Just as lawyers use AI to simplify case law or draft agreements, financial advisers will use AI to quickly assess client circumstances, help articulate financial goals, and efficiently process data inputs to more effectively establish investment plans.It’s difficult to say for certain how AI will impact wealth management since the technology and goals continue to evolve.

AI and the Wealth Management Process

user input to generate content and make predictions

Artificial intelligence can absolutely improve the wealth management process and enable financial advisors to serve clients more expertly, but it will not replace the human element of advising that develops and deepens over the years.Stableford Capital is invested in a technology infrastructure that can improve our wealth management process. Our investment teams selectively pick and choose where artificial intelligence is most useful or relevant to our clients, including:

  • Protecting your personal information by working alongside cybersecurity experts to safeguard your accounts using multi-layered, best in class practices and procedures, including 24/7 account surveillance.
  • Create models to help clients understand their saving and spending patterns and reveal insights like how early they can retire.
  • Leverage insights like retirement age, savings and spending, investment behaviors, and goal parameters, to create customized financial plans that help clients meet their short-term and long-term financial goals.

As machine learning technology evolves it will undoubtedly have other beneficial applications for both clients and investment teams.

Strengths and Benefits of Artificial Intelligence

AI certainly has its strengths, but humans are still better at certain types of tasks:

  • AI strengths: Memory, speed, stamina, processing power
  • Human strengths: Empathy, creativity, judgment, intuition

Combining these strengths provides clients with the best financial solutions. No matter the quantity or quality of the data produced by AI, it's not useful without a capable financial advisor to interpret it and implement it for the benefit of a specific client.

Utilizing technology to protect information

AI can provide benefits such as:

  • Improved personalization: Quickly identifying customers’ unique needs, allowing financial advisors to tailor investment offerings and improve customer service.
  • Streamlined compliance: Processing regulatory information to ensure firms stay compliant with rapidly changing requirements.
  • Improved decision-making: Distilling data to provide deeper insight into customer and market data, enabling more effective decision-making.
  • Enhanced automation: Allocating routine tasks and time-consuming processes to AI-based systems gives advisors more time for cognitively-demanding tasks.

Recent McKinsey research shows that wealth managers at firms still relying on manual data analysis spend up to 70% of their time on advisory-irrelevant activities. AI can automate tedious and repetitive tasks enabling advisors to focus on value-adding activities for clients.

Client Facing Applications

AI can help us think differently about financial literacy and education. The more informed clients are, the better the outcomes will be. AI could be a tremendous tool to unearth better insights into what clients are looking to achieve.As the financial world gets increasingly complicated, Clients using AI to generate questions or access incredible amounts of information about new assets, new currencies, and new frameworks prior to meeting with their financial advisor will facilitate better questions.Additionally, firms are likely to roll out supplemental automated service channels or applications that offer 24/7 self-service assistance. These AI-generated tools will not replace human interaction; instead, they will create more ways for clients to engage with their portfolios and financial advisors.

Advisory Facing Applications

We can reap the most benefit from artificial intelligence by blending human and machine work. By first using AI for data collection, followed by using human experience to interpret the AI-derived data, the end result will be a more informed decision that saves time and in turn, costs.Some ways that AI can assist here are:

  • AI technology can analyze terabytes of data and millions of public documents in real-time and deliver market intelligence to wealth managers to help improve investment returns.
  • Systems can recommend the next best actions, tailored to individual client goals, enabling financial advisors to better serve customers regardless of market conditions.
  • Using an advisor-crafted investment plan, AI could be used to monitor client circumstances and recommend actions or corrections along a client’s economic path.
  • Predictive analytics may allow advisors to increase the scale at which they can effectively deliver customized client experiences and solutions.

It is important to note that deploying AI in the wealth management process is not the same as using robo-advisors.

Image of digital information and human face

For example, leveraging the strengths of AI, Stableford advisors use technology to supplement our active professional investment management and we continue to stay apprised of AI advancements and implement new technologies that benefit clients.Your personal investment team is continually monitoring accounts, making adjustments, and giving constant attention to your portfolio construction process. Stableford advisors can adapt their AI inputs, allowing for real-time suggestions such as increased savings or modifying goal amounts.This infrastructure can increase communication and collaboration between Stableford’s already integrated approach to wealth management. We recognize the importance of keeping up with the technologies and plan to continue expanding and incorporating tools that are available to benefit clients.

Incorporating AI into Client First Financial Services

AI helps make our processes and data-driven insights more efficient and allows us to take the next best action for clients. However, Stableford understands that the outcomes of using wealth management AI aren’t just in numbers—these insights help families save for their dream homes, investors enjoy the retirement they’ve saved for, and can ensure children and grandchildren have access to higher education.As a result, Stableford believes the best wealth management is rooted in the relationship between the client and the investor and starts with asking good questions, listening, learning about the client, their family, and their goals, actively managing the portfolio, and utilizing the right tools to create custom options for the client’s unique wealth considerations.Driven by a client-first approach, our process uses institutional strategies tailored for the individual investor, combined with actionable insights and a focused risk management process. The personal relationship between a wealth advisor and the client is critical in this process, and cannot easily be replicated by AI. What we do know is that human interaction, communication, and emotional connection are critical to providing the information and insights necessary to help the client make the best choice, and Stableford will continually strive to prove our worth every day while helping you increase yours.

Andrew Brinkman
Andrew J. Brinkman is the Founder of Stableford Capital. Over the course of his 45+ year career, he built A.J. Brinkman & Co., a leading foreign exchange arbitrageur and institutional floor broker, was a managing partner of Petros Capital, a long/ short institutional hedge fund and, for the past ten years, he has been a discretionary asset manager for high net-worth families. Andrew Brinkman has been a member of the Chicago Mercantile Exchange, the New York Futures Exchange, and the Chicago Board of Trade. A 1978 graduate of Cornell College with degrees in Economics and Political Science, he was a board member for ChildHelp USA, a board member of the Berry Center for Economics, and former trustee of Cornell College.