Part of Canada’s AI lag can be attributed to execs who have not yet introduced the tech in any meaningful way to drive investment returns, Roman Regelman, group president of wealth management tech provider FNZ, says.Fred Lum/The Globe and Mail
Canadian wealth and asset managers are much slower to incorporate artificial intelligence into their business operations compared to global peers, according to a new study.
Only 53 per cent of respondents among Canadian wealth management executives say artificial intelligence is critical to the future of their business while 56 per cent say they believe AI will revolutionize the industry, according to a survey conducted by Britain-based wealth management financial technology provider FNZ Group Ltd.
The findings, which were released this week, highlight Canada’s significant gap with global competitors when it comes to the scale and speed at which AI is transforming the global wealth and asset management industry. Globally, nearly three-quarters of respondents among executives (73 per cent) see AI as critical for their operations, and 63 per cent say it will be revolutionary to the way they do business.
“Canadian banks, insurance companies, credit unions and stand-alone wealth managers are all vibrant players in a very competitive marketplace. But between them all, the underlying technology is quite stale,” FNZ’s group president Roman Regelman said in an interview.
“However, Canada’s securities regulator is actually quite progressive, and they know that innovation has to come.”
The survey, titled “The AI-Powered Investment Firm,” included responses from more than 500 financial institutions in 16 countries that, together, represent about US$74.2-trillion in assets – or 44 per cent of the total assets managed globally.
RBC wants wealth management to be its next profit powerhouse, starting with a big U.S. push
Mr. Regelman said part of Canada’s artificial intelligence lag can be attributed to executives who have not yet introduced AI in any meaningful way to drive investment returns. More than 80 per cent of Canadian executives reported positive returns on their AI investments, which is broadly in line with global averages. But only 5 per cent of Canadian firms are recording positive returns of 7 per cent or more of what they spent on AI. This compares to the global average of 19 per cent of firms.
“When you’re not doing it enough, you don’t see the results and therefore you start doing it less and less, rather than doing it more,” Mr. Regelman added.
Driving AI innovation is particularly challenging in the highly regulated investment industry, FNZ said. Firms face unclear and sometimes shifting guidelines, causing them to move cautiously on AI adoption
Seventy-one per cent of Canadian firms say clearer risk management guidelines from regulators would enable greater AI use, compared to the global average of 62 per cent.
Step aside, human advisers. AI may become the new financial planning powerhouse
Mr. Regelman said he is optimistic that Canada will see a dramatic swing in AI adoption over the next three to four years, as the current generation of executives are more tech savvy.
“I really do believe that all the ingredients are there for change,” he added.
FNZ found that globally, investment firms are already well advanced in adopting AI tools in multiple areas of their operations including the back-office administration and the front-office client support.
“AI automation of code development, business processes and custody services are yielding enormous efficiency and productivity gains,” FNZ said in the report.
Firms can also deploy AI to automate compliance checks, detect cybersecurity anomalies, identify fraudulent transactions, and create smarter chatbots and build self-service portals with 24/7 personalized support.
Over the next three years, 45 per cent of Canadian firms expect to also see AI used in portfolio management tasks and customer analysis.
While AI will relieve employees of many repetitive tasks, Mr. Regelman said the role of the financial adviser will not be replaced but enhanced. Industry executives told FNZ that AI frees advisers to focus on the human elements of their role, increasing the importance of skills such as empathy, listening and emotional support qualities that clients highly value.
“AI is no longer a side project for the wealth and asset management industry. It is rapidly redefining the economics of advice”, he added.
“But the ability to be with you in your living room and talk to you about your comprehensive financial future, talk to you about your kids and retirement goals, that is harder to replicate with AI. That comes down to trust and integrity.”