Wealth management firms and advisors are still in the early stages of adopting AI. Various uncertainties and some doubts about how far to trust this technology are negative forces, but on the upside, efficiency gains are encouraging firms to become involved.

Wealth managers are in the early stages of adopting AI and uncertainties about how it is going to be regulated may hamper speedier adoption, wealth and banking tech firm Avaloq says.  

As this news service has previously written (see examples here and here), there are scores of use cases for AI in wealth management), from helping with onboarding through to risk management in portfolios.  

Last November, research by Avaloq, based on a survey of 300 wealth managers and 3,000 investors globally, found that 87 per cent of UK wealth managers believe that AI is crucial to the future of the industry and could significantly improve wealth management practices.

In the UK, the story is mainly about using AI to make business more efficient, Suman Rao, managing director for UK and Ireland at Avaloq, told this publication.  

“AI adoption is still in its early stages. Many wealth managers recognise the potential but highlight the need for more effective implementation strategies to maximise its benefits,” Rao said.  
 
“The main hurdle for AI adoption in the UK is integrating these new applications with legacy systems. Many firms struggle with outdated platforms [and] fragmented data, making it difficult to implement AI solutions effectively. Our research shows that over half (54 per cent) of UK advisors believe their current technology systems need an upgrade, while only 35 per cent feel their existing platforms are designed to meet their needs,” Rao continued.  

“Regulatory uncertainty is another key consideration. The evolving landscape of AI governance in areas such as transparency and data privacy can often create hesitation, particularly among small and mid-size wealth managers,” he said.  

Rao pointed out that Avaloq research has shown that 87 per cent of the wealth managers it surveyed think AI will benefit the sector.  

“AI adoption in the UK wealth management sector is primarily focused on improving efficiency, streamlining back-office processes and supporting advisors in scaling their services,” Rao said.  

“Beyond operational efficiency, AI can help advisors manage a larger client base by automating routine tasks and enhancing data analysis. AI-powered tools can process vast amounts of information quickly, assisting with portfolio monitoring, compliance checks and reporting. Machine learning models can also be used to identify patterns in client behaviour, helping advisors provide more tailored recommendations." 

One hurdle is client trust, he said.  

“Another challenge is client trust. A quarter of UK wealth managers (24 per cent) believe their clients could never trust AI for investment, with a similar number (27 per cent) saying their clients would never trust AI when it comes to financial planning. 

"For AI to be successful from a client perspective, wealth managers need to work closely with their clients to demonstrate the value that AI can bring to their portfolios, while ensuring that the use and impact of the technology remain transparent and well understood," he said.  

“Ultimately, AI’s ability to help wealth managers scale their services efficiently while improving decision-making will be a key differentiator in the industry’s digital transformation. The challenge lies in ensuring AI enhances, rather than complicates, the advisor-client relationship,” Rao added.

On a separate but related note, Avaloq has issued a survey showing that wealth managers lag behind clients' expectations about digitalisation and the use of modern communications channels.