Wall Street has welcomed generative AI, which can drive significant revenue growth.

• Experts expect generative AI to transform the way wealth management firms do business.
• The impact of Gen AI can be amplified when it is integrated with other AI technologies, as per PwC.
• BlackRock and Morgan Stanley are among the big firms that have embraced AI.

Artificial intelligence is now being used on Wall Street, and it is predicted to change the way companies operate.

PwC's U.S. asset and wealth management consulting leader, Roland Kastoun, stated that generative AI, when combined with other AI technologies, can have a powerful impact on wealth management and asset management firms.

He stated that this is a significant booster of productivity and revenue growth for the industry.

According to McKinsey & Company, the banking sector is predicted to have one of the greatest opportunities in generative AI. The McKinsey Global Institute analyzed 63 use cases and found that gen AI could add the equivalent of $2.6 trillion to $4.4 trillion in value annually. While not the largest beneficiaries within banking, asset management could see $59 billion in value and wealth management could see $45 billion.

Some of the biggest names in the business are already on board.

The memo was sent earlier this month, informing employees that in January, generative AI tools for Aladdin and eFront would be rolled out to clients to help users solve simple how-to questions.

The memo stated that GenAI will revolutionize the way people interact with technology, increase productivity, and elevate the quality of work already being done. Additionally, it is predicted that GenAI will alter clients' expectations regarding the frequency, timeliness, and simplicity of interactions.

In September, Morgan Stanley unveiled its generative AI assistant for financial advisors, called AI @ Morgan Stanley Assistant. According to a memo from co-President Andy Saperstein, generative AI will revolutionize client interactions, bring new efficiencies to advisor practices, and ultimately help free up time to do what advisors do best: serve their clients.

In recent months, JPMorgan and Goldman Sachs have announced plans to develop AI in-house, with JPMorgan's IndexGPT utilizing cloud computing software with AI to analyze and select securities that are customized to meet customer needs, as stated in a May filing. Goldman, on the other hand, is using its technology to generate and test code.

Investing in Wall Street's artificial intelligence boom is a smart move.

Mike Mayo, a Wells Fargo bank analyst, stated that those who do not adopt AI will be left behind.

"If the bank across the street is using AI for financial advisors, how can you not use it too?" he said. "It increases the competition stakes and you can either keep up or fall behind."

As the younger generation matures, digitally native investors will increasingly demand more digitized services, personalized solutions, and lower fees, according to William Blair analyst Jeff Schmitt in an Oct. 20 note.

As investors gain control over more invested assets, wealth management firms and advisors are using AI to improve their offerings and adapt their service delivery models to attract them.

Through 2045, it is estimated that Cerulli Associates some $72.6 trillion in wealth will be passed on to heirs.

Not just generative AI

Kastoun of PwC stated that the major allure of generative AI lies in its capacity to produce content, which distinguishes it from other AI technologies.

While technology can analyze vast amounts of data, it's a whole different ball game when it can generate new content based on that data, which is what's generating all the excitement.

He stated that both wealth management and asset management businesses utilize various AI elements, not only generative AI.

Kastoun stated that the impact across the industry is being created by the power of combining different technologies and methodologies.

T. Rowe Price's New York City Technology Development Center has been developing AI capabilities for several years, and firms are now exploring ways to integrate generative AI into their businesses and existing AI technologies.

Jordan Vinarub, head of the center, stated that the ultimate goal is to assist decision makers in utilizing data and insights to improve their performance.

His team made a big pivot with the arrival of generative AI.

"This moment was significant for the company to recognize the need to comprehend and utilize this development to benefit the business," Vinarub stated. "Over the past six months, we have progressed from initial research and demonstrations to implementing our own internal application that utilizes the large language model to aid our investors and research process."

New entrants

Small upstarts are also exploring ways to disrupt the industry with generative AI, not just big firms.

Farther, a wealth-tech firm, is a new type of financial institution that combines expert advisors and AI, as stated by its co-founder, Brad Genser.

"If you don't integrate technology with human processes and maintain control over both, you will end up with an incomplete product. However, if you work together to build both people processes and technology, you will create something that is greater than the sum of its parts."

An investing platform called Magnifi utilizes ChatGPT and computer programs to offer personalized investing advice. Users can connect the technology to their accounts and monitor their portfolios. As of November, Magnifi has attracted about 45,000 subscribers and over $500 million in aggregate assets.

"Tom Van Horn, Magnifi's chief operating and product officer, stated that the company's copilot is designed to assist individual consumers in achieving better wealth outcomes over time, rather than taking control away from them."

An AI coworker

As technology advances at a rapid pace, it is challenging to predict what new use cases may emerge in the future. However, as productivity continues to improve, advisors can devote more time and energy to their clients.

PwC's Kastoun stated that it could alter our perception of how we establish our business models.

Experts emphasized that technology is not necessarily replacing humans, but rather enhancing their capabilities and enabling them to work more efficiently.

"Mayo from Wells Fargo stated that the ideal dream state is for every employee to have an AI copilot or coworker and for each customer to have an equivalent of an AI agent. However, he emphasized that this is not just about computers or humans alone, but rather the combination of humans and AI that can lead to better competition than either party could achieve on their own."

— CNBC's Michael Bloom contributed reporting.

The article has been revised to clarify that Magnifi announced in November that approximately 45,000 subscribers have linked over $500 million in total assets to the platform. A prior version contained an incorrect figure.