The Big Picture: How AI Will Re-Shape the Business of Wealth Management

This episode of RIA+ provides a macro view of how artificial intelligence is likely to transform the business of the wealth management business. Neil Abromovage and Abbe Galvez Cordon from TD Securities sat down with Mark Bruno to share their big picture perspective on how AI will change the profitability of wealth management firms, influence valuations and M&A activity - and provide deeper access to investment opportunities across the wealth and asset management ecosystems.

Summary

• AI adoption accelerating rapidly: the adoption of AI in wealth management is happening much faster than anticipated. Many firms initially expected a 3-5 year timeline for AI integration, but the pace has accelerated dramatically, with changes occurring in months rather than years. This rapid shift is partly driven by individuals using AI tools in their personal lives, making them more comfortable and eager to use similar technologies in their professional settings
• Evolving AI partnership dynamics: the wealth management industry is seeing a shift in how companies are approaching AI partnerships. Initially, wealth managers relied on existing tech partners for AI solutions, but now they are exploring AI-native businesses. These AI-native businesses are now considering going it alone if larger partners cannot move at their pace, but partnerships between innovative talent and established firms with data and regulatory knowledge still offer an elegant solution
• AI enhances advisor-client interaction: AI is moving beyond basic efficiency gains to enable better thinking and improved client interactions. Advisors can use AI to plan meetings more effectively, access client data instantly, and provide personalized advice in real-time. This leads to deeper, stickier client relationships and allows advisors to serve more clients with greater depth
• AI's impact on business models: AI implementation can lead to significant business model efficiencies for wealth managers. By augmenting advisors with AI agents, firms can increase productivity, bring in more assets, and drive broader margins. These margins can then be reinvested in recruiting, M&A, or building specialized capabilities, transforming the business beyond just improving user experience
• Data lakes and valuation premiums: larger wealth management firms are increasingly focused on building data lakes, potentially reinventing themselves as both wealth managers and data providers. Companies in the data business tend to trade at a premium, suggesting that firms effectively combining wealth management with data analytics could see higher valuations
• AI simplifies tech stack integration: modern AI platforms can integrate with existing technology in a modular fashion, eliminating the need for firms to rip and replace their entire tech stack. These platforms provide a data layer that connects different tools, allowing for seamless data flow and improved functionality. This approach simplifies technology adoption and ensures that firms can leverage their existing investments while moving towards an AI-driven future
• AI expands advisor population: AI has the potential to expand the population of financial advisors and create a gig economy around advice. AI tools enable advisors to be more efficient and work part-time, while smaller RIAs can remain independent by accessing great technology. This shift puts the model of advice into the hands of the advisors themselves, giving them more control and flexibility
• Leadership focus shifts to tech: the role of CEOs and firm leadership is increasingly focused on making critical technology decisions. Leaders are spending more time learning about how AI can transform their business models and improve outcomes for clients and advisors. This shift reflects the growing recognition that technology is a key driver of success in the wealth management industry