Generative AI has captured the attention of the world in 2023. Allowing users to leverage trained data models to ‘generate’ content in the form of text, images, audio or videos, AI applications are proving highly successful. Even now, they are redefining how corporates, consumers and governments approach technology.
Yet AI is not the only driver of the future that’s top of mind. The summer’s fires and floods in the northern hemisphere have emphasised the danger of climate change, as well as the huge technological transformation required to reach net zero carbon by 2050. That can only increase demand for sustainable investing.
Both generative AI and sustainability are drivers of the future that are at inflection points. Amid the excitement about AI, it’s widely known that ChatGPT racked up 100 million users within two months of its launch and that all types of organisations are examining how to put the technology to use. Sustainability is not moving at such a pace, but nonetheless the shift to a zero-carbon economy by 2050 will require an economic and technological transformation.
For wealth managers and financial intermediaries, these are both topics that are impossible to ignore. What’s more, if addressed properly, they can deliver an invaluable competitive advantage.
Generative AI’s transformational possibilities
Turning first to generative AI, there has been plenty of hype. Some new technologies go through a ‘hype cycle’, where inflated expectations are followed by disillusionment before the real advantages become clear.
Just as in other industries, the realistic uses for generative AI in the wealth management sector are currently taking shape. Broadly speaking, the technology has the potential to significantly improve client service by providing personalised advice and recommendations in real time. It can also automate routine tasks and reduce the workload of human staff.
To give a few highlights from a long list, chatbots could deliver instant support for clients. AI could also help relationship managers to quickly personalise advice. It could assist in compliance and risk management through detecting compliance violations. And, it could reduce workload for staff in areas like financial reporting.
Julius Baer is beginning to leverage generative AI. Our Launchpad innovation lab in Singapore has introduced several initiatives. Content creation tools are being tested to refine our investment publications. Additionally, we are working on offering trend analytics for relationship managers and an advisory concierge service tailored to clients’ specific needs. These initiatives aim to seamlessly integrate technology into our day-to-day operations and client services.
Sustainable investing’s untapped opportunity
Turning to sustainable investing, there is evidence that demand is not yet fully met by investment advisors. Research from Deloitte, the professional services firm, found that 79% of EU private investors consider sustainability important to how they invest. Yet 60% said their banks and advisors had yet to discuss sustainable investing strategies with them. That suggests financial intermediaries could be missing a major opportunity.
For financial intermediaries, sustainable investing offers the chance to lift client relationships to the next level. Discussing how clients’ personal values affect their approach to sustainability topics can strengthen relationships. What’s more, competence in this area shows that the financial intermediary offers high-quality and innovative advice.
Yet sustainable investing is a complex field. It refers to a range of practices in which investors aim to achieve financial returns while promoting long-term environmental or social value. Yet there are several types of sustainable investing as well as a plethora of environmental, social and governance (ESG) analytical data from different providers that may be contradictory and confusing. For financial intermediaries who are not specialists there are dangers in becoming lost in an alphabet’s soup of different metrics.
As regulators around the world increasingly turn their attention to sustainable investing, a little knowledge is a dangerous thing. In Switzerland and the EU, for instance, the Self-Regulation Sustainability Guidelines and Sustainable Finance Disclosure Regulation, respectively, require advisors to consider clients’ sustainability preferences when giving advice. What’s more, across much of the world there are increasing regulations governing the labelling of sustainable investment products.
Preparing for change
Arguably the Fourth Industrial Revolution, which AI is a key part of, and the decarbonisation of the energy industry, represent the most dramatic economic upheaval in hundreds of years. Like wealth managers broadly, financial intermediaries must make the most of the opportunities to come which may require being open to change.
In the field of sustainable investing, we recognise the importance of supporting financial intermediaries as they engage their clients as early as possible. Discussing sustainability is not only regarded as a sign of quality and innovation, but also moves the relationship into the realm of personal values, differentiating and adding strength to the intermediary’s advisory role. Julius Baer’s expertise in ESG – through our curated open product platform, our advanced ESG rating methodology, and our experience creating dedicated and focused ESG services – makes us the default partner to guide you in this new and exciting landscape.
Wealth management is unique in the strength of its client relationships that few other industries can match. Cutting-edge AI technology can enhance those relationships, while expertise in sustainable investing will differentiate a financial intermediary.