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AI in wealth management & its potential to disrupt the space

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Wealth management services business is not easy to start in India as financial literacy is low. Most people are not even aware of how they need to create wealth and then manage it.

Only a few understand the importance of wealth management, and they seek the services of financial advisors to manage their money.

Financial advisors do a great job at managing clients’ money, but in the end, they are humans, and making an error is natural. You do not want any errors when it comes to your money, do you?

Hence, we seek help from technology – AI has come out as a perfect technology that is helping us manage money, invest money, and much more.

Some companies use it to handle low-value tasks, while others give AI the power to manage everything from end to end.

Wealth Management & AI

Wealth management is a broad term and includes services like financial advice, tax guidance, estate planning, and even legal assistance.

It looks at multiple factors that impact your overall finances before providing recommendations to maximize your wealth. The financial advisory has always been a costly affair. With AI, the cost has significantly come down, and it has been found that AI-based systems are better at making decisions.

Below are some areas under management where AI is helping:
Investment advice: AI-based systems can study customers’ financial position, financial history, and habits and deliver advice accordingly. Customers do not have to spend hours with advisors to provide inputs before investing – it is done in minutes.

Tax planning: Tax planning for businesses, HNIs, and other similar clients has always been a complicated process. They are spending big on tax planning. Today, we have AI-based tax planning systems that can autonomously compare tax assumptions, projections, and configurations. They can also analyse past data and other financial sources. Based on the analysis, the system recommends optimal tax planning.

How is AI helping in wealth management?
There is a lot AI is doing in wealth management to make the life of clients and companies easier. To give you some perspective, below is how AI is useful in wealth management:

1) Knowing clients better:

As mentioned above, in wealth management, advisors need to take into account many factors and accordingly provide a recommendation.

AI in wealth management helps advisors understand their clients in a better way and not just label them as conservative or aggressive investors.

AI also derives relevant social signals that give advisors insight into their clients’ current and future needs.

2) Personalised recommendation:
It is the need of the hour as no client wants to have generic products. AI is helping advisors create a personalized solution at ease.

The future

Advances in Artificial Intelligence promise to deliver a second big bang to the wealth management universe. The applications that we see today are just a start to the big disruption that AI will have in this space.

Today, a small percentage of Indians can manage their wealth themselves. With AI-based wealth management systems, every investor can manage their wealth or at least start with it.

To companies, AI will allow them to expand their customer relationship, deliver better advice, and lower costs. Today, the biggest challenge for companies is the amount of time and effort they need to put in with a single client.

However, with AI, human effort goes down. The companies can take more customers on board.

With the increasing financial literacy in India, investors will eventually learn the importance of financial planning and wealth management and approach companies.

The only way these companies can fulfil growing demand is by using AI. We should be prepared to see more of AI in the financial space.