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Europe’s top wealth managers are rushing to defend themselves against advances in AI after the launch of a tax planning tool in the US intensified concerns that tech disruption would lure customers from traditional advisers.
Shares in wealth management groups tumbled this month after US fintech Altruist unveiled its latest AI-led offering, which helps advisers create tax strategies for clients within minutes by interpreting payslips and other data.
The launch of the tool, which can analyse “what-if” scenarios such as the impact of property sales or retirement transitions on customers’ taxes, revived concerns that some units in wealth management groups could become obsolete.
Bosses at St James’s Place and other wealth managers including Schroders and Lombard Odier have defended their business models in light of the threat, arguing that they are increasing their use of AI.
They said they stood to win clients from competitors that are slower in embracing AI, adding that the technology would not be capable of replacing the more personalised and specialised services they offer to extremely wealthy customers.
Advisers that did not use AI “may well be replaced by those that do”, said Mark FitzPatrick, chief executive of St James’s Place, which oversees about £220bn.
While AI may not replace humans, it was “going to put the work that advisers do on steroids” by making them more productive, he told the FT.
St James’s Place CEO Mark FitzPatrick said ‘advisers who don’t use AI may well be replaced by those that do’
Investors said groups offering financial “guidance” and “targeted support” — general tips and help, rather than individual recommendations that amount to regulated financial advice — were most at risk.
“Financial guidance is eminently ‘disruptable’ by AI,” said one fund manager. “Ultimately, for full-blown financial advice, it’s a people business. Individuals find it hard enough to trust humans to advise on large sums of money, let alone an algorithm.”
Richard Oldfield, chief executive of Schroders, which owns private client business Cazenove Capital, said using more AI tools to serve wealthy customers “helps us to be more efficient and effective for clients”.
He said providers of basic advice were at greater risk of disruption because companies that serve the “mass affluent” market, rather than very wealthy people with more complicated needs, “are really going to use AI to replace advisers in areas where that makes sense”.
FitzPatrick said St James’s Place was enabling its 5,000 advisers to use AI to record conversations and prepare recommendations for clients. Its internal ChatGPT-like tool, ChatSJP, provided quick and accurate answers to technical questions, which helped “improve quality and speed of service”, he said.
Geoffroy de Ridder, head of technology at Lombard Odier, which oversees SFr223bn ($288bn), said “every simple activity” currently undertaken by humans, such as bringing on board clients and back office processing, could be replaced or complemented by AI.
“I clearly expect some savings on the back end,” he said. “We are accelerating the development of . . . projects, particularly for ‘know your client’ and anti-money laundering compliance areas. This is where AI can help. We can now do things 20-50 [times] faster.”
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A survey of 300,000 investors across the world by Oliver Wyman showed that AI use for investing had jumped to 44 per cent from 34 per cent in the past two years. “Many investors feel AI understands their situation better and is less judgmental than human advisers,” the consultancy said.
However, some analysts have downplayed the threat of AI immediately replacing human financial advisers.
Julian Roberts, an analyst at Jefferies, noted that it was “no surprise that AI firms are selling their services to advisers rather than to advisers’ clients”.
“Not only does it make sense as an easier route to market, but there are also far fewer regulatory hurdles.”