The AI Race & Different Motivations
Authored by: Jeff Nash, Founder & CEO, Bridgemark Strategies
I’ve never seen an industry more divided on a single topic than wealth management is on AI right now. Half the room is all in. The other half is waiting to see. Will it be a great business investment or a money pit for companies striving to capture its benefits? Will it be a job killer or a job enhancer? Will it dehumanize relationships or create efficiencies that enhance connections between people?
What’s not debated is that wealth management firms building out their infrastructures to embed and integrate AI into workflows are devoting an exorbitant amount of resources to the endeavor. The result? Major cost centers with an undetermined ROI and no timeline for shifting to a profit center.
But what is the end game for wealth management firms in the thick of the AI-implementation race? That productivity gains are driving AI investment and adoption is not contested. The mistake is assuming that the motive for chasing these gains is the same for everyone. “Winning” in the current AI landscape means different things to different firms, business models and channels, and we are just in the initial stages of assessing AI. But what we’ve seen so far, to my mind, predicts some of what is to come.
The industry is increasingly bifurcated, comprising large firms seeking scale and efficiencies, and RIAs and other similar strategic acquirers looking for more growth. Firms at scale often find it too hard to grow at a sustainable rate, and cost-cutting becomes an important part of the focus. We are starting to see wirehouse entities reducing staff, either in the form of layoffs or reductions in new job openings. Operating within the big-bank ecosystem, where people are considered a cost center (often the bank’s largest), means that reducing overhead is a constant focus.
In the independent RIA space, the paradigm is different. These organizations are not “net cost” focused as they look for hyper growth through both organic and acquisitions. Of course, financials matter, but they are not a driving force. Their philosophy that you grow when you deliver exceptional service translates into leveraging AI to support more clients.
The future of AI in Wealth Management
The future of AI will be driven by the goals of the firm or person that is implementing the AI. If the goal is to cut costs, which could include cutting people, then you will see firms look to adopt AI that will drive efficiencies around any and all of the touchpoints in the client relationship, up to and including the role of a financial advisor.
If the goal of the firm is to provide for scale so an advisor can meet with more clients, then AI will be leveraged to eliminate and simplify the operational aspects of a client relationship, effectively being a force multiplier. AI can also be used to fuel growth, as it can help find new clients and prospects. The opportunities for AI are as robust as you can imagine.
Right now, people across all industries are gaining more perspective when it comes to AI. Within the wealth management industry, the future is still uncertain, but the path firms are taking is becoming clear.
Some have chosen a “defensive” path around cost-cutting and staff reductions. Others have chosen an “offensive” path to drive scale and growth to serve more clients better. The goals that firms set for AI will determine what AI does for advisors, which is building for them or building around them.
