The future of wealth: investor trust in AI

Our latest sponsored research delves into the dynamics of the wealth industry today – delivering some real-world insights that will shape key wealth trends in 2024 and beyond. In this, the third in the series, we delve into investor trust in AI.

• In late 2023, LSEG sponsored detailed research to better understand changing preferences and emerging trends within the wealth industry. 
• We asked investors across the globe about how changes in the wealth industry are impacting them.
• This insight looks specifically at investor trust in AI. 
  

In this, the third in this series that looks at the evolution of the wealth industry – and the impact of this evolution on advisors, investors, wealth firms, brokerages, and other industry stakeholders – we focus on investor trust in AI.

• Providers agree that AI will change the way they operate:

A substantial 69% of providers agree that “AI will significantly change the way my firm works”. 

Furthermore, almost all identify themselves at advanced (48%) or mid-implementation (44%) for AI automation. 

Just 8% are at the early implementation stages and 1% are at the planning stage.

• Respondents are willing or somewhat willing to harness AI:

Respondents were asked if they would be willing or somewhat willing to use AI-enabled processes for a range of tasks. 

Across all regions, respondents were:

* Most likely to use AI to research products and services, with 91% in EMEA, 92% in North America and     95% in APAC saying they were willing or somewhat willing to do so.

* Least willing to use AI-enabled processes to manage their investment portfolios directly, with  percentages dropping to 43%, 53% and 43% respectively.

• AI does not appear to be a reality for several areas of work – yet:

When asked about the areas in which their firm has already implemented AI use cases, under half of respondents had done so across all areas of work listed. Some examples of the areas listed include, but are not limited to, investment advisory, investment research, financial planning and fraud detection. Implementation is highest in investment research (46%) and investment advisory (44%). 

Firms are more confident they will be implementing AI across several key areas in the next 3 years – half or more of firms expect to implement AI for financial planning (50%), investment research (51%) and investment advisory (56%) within three years. 

• North American investors appear more open to handling activities through AI:

AI is still far from the preferred approach for many activities, but those in North America are significantly more likely to prefer this approach in activities such as:

* Researching products and services (29%, as compared to 13% in APAC and 14% in EMEA).

* Portfolio rebalancing (23% as compared to 12% in APAC and 14% in EMEA).  

• There appears to be agreement that AI will reshape the investment landscape, but regional differences are apparent:

North American investors are significantly less likely to invest through big brand retailers or tech companies than those in other regions, with 45% in the region saying they would do so, as opposed to 53% in EMEA and 54% in APAC.

North American investors are also significantly less likely than others to stop using an investment advisor by 2030 because of advances in tech (48% compared to 57% in EMEA and 56% in APAC).

Let’s take a closer look at these key take-aways and unpack what these insights mean for wealth industry players.

These findings confirm that AI is indeed shaping the investment landscape – and will continue to do so with greater momentum into the future. With a substantial 69% of providers of the opinion that AI will significantly change the way their firm works, it is evident that a sea change is underway. Not only this, but the vast majority are moving forward with AI implementation. Very few are lagging.

This is supported by a general willingness to incorporate AI into the investment process – but trust in technology does not yet extend to all areas of the investment process. Whilst many respondents are comfortable with AI-enabled research into products and services, the percentages in favour drop significantly when it comes to managing investment portfolios directly. 

This suggests that trust in technology still has some way to go and that investors still largely value human input into the decision-making involved in managing a portfolio. This supports our view that a hybrid digital and advice model will gain traction going forward. 

While in certain areas, the implementation of AI is lagging, many are confident that they will be implementing it across several key areas in the next 3 years, suggesting continued momentum in the adoption of AI within the wealth industry. 

Regional differences are apparent, with investors in North America holding different views to those in APAC and EMEA in several key areas.

Interestingly, although those in North America are significantly more likely to prefer AI in certain investment activities than those in other areas, they are also much less likely to stop using an investment advisor because of advances in tech. 

Once again, this suggests support for a hybrid investment model, and underscores the fact that the new normal in investments holds ample space – and opportunity – for both advisors and those catering to the self-directed market.

Conducted by ThoughtLab, the research included two global surveys, one of 2,000 investors across countries, wealth levels, ages, lifestyles, occupations, genders and other characteristics, and the second of senior executives at 250 investment providers.

Some key areas probed included: how the role of financial advice is evolving; the impact of experience on investor behaviour; attitudes towards and adoption of AI in investment; and gaps in the sustainable investment space.

The research covered four regions – Asia Pacific, Europe, the Middle East, and North America. By wealth level, the largest shares comprised mass affluent (25%) and high net worth (25%), followed by very high net worth (18%). By age, the largest share consisted of Gen X (31%), followed by Baby Boomers (30%). 

The study also included a benchmarking survey of senior executives from a cross section of 250 wealth management firms, from independent wealth advisors and private banks to wealth management divisions within regional and international banks.