Meetings with private bankers could soon feel like a form of therapy, finews.asia editor Andrew Isbester writes.
You can say a great deal about private banking and wealth management. But to date, no one has ever mistaken a portfolio review with a relationship manager for a weekly session with a psychological therapist.
Get ready. According to Capgemini, that may be about to change given the advent of artificial intelligence, and in particular generative AI tools.
Here to Stay
In its 2024 wealth report, the consultancy indicates that not only is the new tech here, but that it all may be about to get very touchy and feely.
According to them, almost half of the wealth management institutions they surveyed are already using AI, and just under three-quarters of them plan on increasing adoption at the enterprise, or entity level, over the next one to two years.
Reading the Room
Still, how is this new tech going to convert the tedium of listening to certain private bankers listing in an unchanging, evenhanded monotone the ins and outs of currencies, bonds, and equities before handing over some private equity and alternatives brochure they can’t fully get their heads around?
For that, we have to take a step back. Much of it seems to lie in more sophisticated pattern recognition. Many businesses, not only banking, segment clients into specific groups - with the financial industry traditionally using fixed demographic elements such as age, location, and income for that purpose.
Bring on the Algorithm
Now, Capgemini says that is no longer enough given those variables don't capture more «psychographic» indicators such as emotions and biases. The advent of AI facilitates a new era of supercharged, or micro-segmentation of clients incorporating dynamic and attitudinal behaviors to create increasingly precise risk profiles.
«AI-powered systems can analyze data and detect patterns that may be difficult for humans to recognize, enabling relationship managers to take proactive measures in advising clients,» Capgemini wrote in the study.
Going it Alone
Regarding portfolio management, AI helps provide better insights by using advanced algorithms that monitor markets, news, and events - 24 hours a day, 7 days a week.
«While traditional data analysis relies on humans to define rules, AI autonomously discovers patterns without human intervention. Additionally, AI can help diversify and rebalance portfolios by evaluating various investment avenues, automatically identifying low-correlation assets, triggering alerts, and suggesting adjustments,» the study indicates.
Getting the Impulse Out
According to the consultancy, adhering to a rules-based investment process «removes discretion» from daily decision-making and «reduces the chances of impulsive actions». Still, although much of that seems to be pointing in the right direction, there is nothing here that says we are anywhere near peak therapy yet.
That will come from the increased use of the so-called psychographics with the study of client personality, attitudes, interests, and lifestyles to determine the range and gamut of the services they might need, with certain wealth managers already leveraging AI to do that more effectively.
Hyper-tailoring
There is another benefit to all this. It will allow for more personalized client communication by providing bankers with real-time alerts related to market and life events and, more importantly, signals when they should reach out to clients, hinting at the new era of mental and emotional support starting to slowly seep through the austere facades of most legacy institutions. As part of that, it seems AI can also analyze communication preferences and determine the best channels and messages for clients.
«From our 2024 executive survey, 59 percent of wealth management executives who leverage behavioral finance believe it aids in advising clients during volatile market conditions and significant life moments,» Capgemini indicates.
Lending Structure
Currently, AI works with predefined formats, such as transaction data and other forms of structured numerical data. But not for much longer, it appears.
«Now, generative models integrate and process structured and unstructured data, primarily harnessing unstructured data to extract behavioral insights. Generative AI excels at interpreting diverse unstructured datasets to generate realistic content, enhance data for machine learning training, and simulate complex scenarios,» the survey report states.
Opinion Mining
According to the consultancy, unstructured data fields contain valuable information, often overlooked in the structured reporting of data, «that can uncover behavioral patterns and sentiments».
«Sentiment analysis, also called opinion mining, implies the interpretation of emotions from any text-based source, be it a news article, social media post, personal blog content, etc. Interpretation of emotion is the key to enriching behavioral finance by providing a deeper understanding of the psychological factors that influence investment decisions,» it indicated.
Image: Shutterstock
Personalized Nudges
According to Capgemini, generative AI can incorporate synthetic data that might now be present in historical data, creating alternative scenarios and predictive analytics that anticipate how different investment strategies and life events might land. This will allow client advisors to engage with clients based on consistent and timely personalized nudges, fostering a feedback loop that strengthens relationships.
«Moreover, integrating AI copilots into everyday applications automates mundane tasks, optimizes time, and minimizes errors. It empowers employees to focus on strategic and creative aspects of their jobs and position them as forward-thinking experts,» they maintain.
The Next Big Thing
The wider financial media, finews.asia included, has been hyperventilating for decades about the wrenching changes changing the face of wealth management and private banking globally. AI may be that new paradigm that heralds the swan song of everything we thought we knew – although it likely won’t be for sure until that ephemeral, kevlar-coated robot in the IT department starts to sing.
But still, whatever happens, it will take time for most of us to even get used to the possibility that a banker might invite a client to an understated, discreetly appointed meeting room for a guided meditation over a recent market correction. But that will still be nothing compared to that first finance ASMR Youtuber tapping on keyboards with AI-generated scripts.
