The FinTech movement revolutionizing the entire financial world obviously affects operations within the asset management sector.
2023 offered little exception to this rule, with AI and machine learning especially making an impact on portfolio management. Industry consolidation also remains a common prediction. Notably, PwC forecasts 16 percent of existing asset management organizations to disappear by 2027.
Here is a high-level overview of the asset management sector as 2023 enters its last few weeks. We focus on the continued transformational impacts of modern technology throughout this financial sector. Leverage these insights to better prepare your company to take advantage of these changes and subsequent opportunities.
What Did The Asset Management Sector Look Like in 2023?
Generative AI Accelerates the Transformation of Asset Management
ChatGPT, the most widely used example of generative AI, garnered massive publicity when first released in November 2022. Generative AI’s impact in FinTech includes greatly improved customer service chatbots with a higher-level of interaction than before. A 2023 E&Y survey noted that 62 percent of customers now trust responses from AI-powered chatbots.
Additionally, automated portfolio management software now leverages gen AI to better assist human asset managers. AI especially makes an impact by parsing through massive amounts of data to find actionable insights for portfolio managers. The technology boasts the capability to analyze unstructured data, leveraging its pattern recognition ability to identify meaningful insights.
Notably, the focus remains on using AI and machine learning in an assistant’s role, helping humans improve their productivity. This boost in operational efficiency remains a critical competitive differentiator for institutions in this sector. The PwC forecast about industry consolidation resonates in this case. It’s a scenario when asset management companies likely need to adopt or die.
A Newfound Focus on Building D2C Relationships
Leveraging generative AI along with machine learning allows asset management companies to focus more on building direct-to-customer (D2C) relationships. In fact, E&Y predicts this relationship to be the new industry norm by the end of the current decade. They feel the increased trust in AI technology noted earlier helps improve adoption rate by both institutions and customers.
Distributed ledger technology – better known as blockchain – tracks all transactions in a granular and secure fashion. In addition to improving cybersecurity, it also better supports regulatory compliance scenarios. Still, a measured approach to increased AI adoption in asset management remains critical. Expect a strong focus on AI governance and data security throughout this effort in 2024 and beyond.
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