How Asset Managers Can Harness AI to Boost Profits, per EY

Artificial intelligence is coming to asset management firms, offering great promise. But the managers will need to “reframe” how they operate or get left behind, according to a recent EY report. The goal is to identify unseen investment opportunities, eliminate workplace inefficiencies and understand how to manage the new technology.

The accounting and consulting giant’s study modeled the next five years, as AI becomes more important to professional services and elsewhere across the economy. “AI promises to help asset managers fundamentally transform for profitable growth,” the report stated. “Firms will require change that’s just as radical,” meaning their old ways of doing things will be disrupted.

The EY view of AI is optimistic, avoiding fears that robot brains will overpower and perhaps destroy humanity. The new advance in artificial intelligence, generative AI, which creates complex content—text, images or other media—that mimics human creativity, will deliver positive results to asset managers by automating processes and augmenting human capabilities, EY argued.

According to the report, the advent of AI will be a welcome savior to managers, who face eroding profitability: The study calculated that the industry’s profit margins fell by 3.2 percentage points during 2022. But a beneficial outcome from AI hinges on managers adopting AI in a smart way, the report contended. Otherwise, it could be wasteful and fail to deliver the efficiencies and other boons that this new technology promises, the study warned.

Already, AI is a hit with the public and has gained its trust, EY observed: “A recent EY survey found that 62% of consumers trust AI-generated responses to their questions (via chatbots or automated responses).”

Hence, “GenAI could be combined with customer data and human insights to enhance personalization and build engagement through next generation hybrid distribution models.” In doing so, AI will “transcend the industry’s current technology silos, with dramatic effects on efficiency and productivity.”

EY’s report listed a host of specific functions that AI can enhance: automating investment operations and client onboarding; doing compliance reviews and generating reports; and upgrading the performance of sales and marketing teams. “For example, AI can be used to significantly enhance the detection of money laundering and financial crime,” the report declared.

At the same time, EY cautioned, AI’s human supervisors must be sure the technology is working the way it is supposed to. This goal calls for a “tailored oversight framework that monitors AI performance and risks, minimizing errors and ensuring full compliance with standards and regulation.”

Such oversight is vital, according to EY’s report, because widespread adoption of AI carries risks such as data security, hallucinations (false answers), confidentiality breaches and copyright infringement.

Thus, EY maintained, it will be crucial for managers to provide staff training on how to handle AI, “including coaching employees who use GenAI on what questions to ask, how to ask them and how to interpret the responses.”