Projections indicate that AI will account for 37% of US wealth management firms’ IT spending in the next 3-5 years, up from 16%.

A recent report?by Wipro Limited, ‘AI in Wealth Management: Navigating an Evolving Data-Driven Landscape’, revealed that wealth management firms in the US are set to significantly increase their AI budgets.

Namely, the study, which surveyed 100 executives across the United States, estimates that the share of IT budgets allocated to artificial intelligence (AI) technology among wealth management firms will leap from 16% to 37% within the period of the next 3-5 years.

This shift reflects a broader trend toward data-driven innovations aimed at enhancing client experiences and operational efficiency. According to Morgan Stanley CEO Ted Pick, artificial intelligence’s ability to transcribe conversations and categorise them by topic could save financial advisers 10 to 15 hours a week. This is only one example of how AI can improve the banking and wealth management experiences.

While 100% of the firm representatives surveyed have adopted AI, only 44% of the respondents have implemented it extensively. Among these, 73% report a competitive advantage. The firms which are using AI extensively see greater efficiency improvements (80% vs 73% witnessed by moderate AI users).

Broad AI usage is also transforming client relationship management, with 65% of those surveyed anticipating significant changes in the next 1-2 years. Significant AI impact is expected in marketing and investor communications as well.

Ritesh Talapatra, Vice President at Wipro, highlighted that AI presents wealth management firms with an opportunity to innovate, differentiate themselves, and thrive in a competitive market. He pointed out that AI’s ability to offer personalized financial advice and enhance client satisfaction is especially valuable as firms face challenges like fluctuating revenues, cost pressures, and growing client expectations.

Besides, AI is enhancing decision-making (77%) and operational efficiency (76%), with over half of wealth management firms (53%) focusing on risk management and 45% on research and analysis as key areas for disruption.

However, wealth management firms face some challenges in AI adoption, including talent shortages and regulatory concerns. A significant skills gap is a pressing issue, with 68% of the surveyed stressing the need for AI-specific training and talent acquisition. Compliance is also a major concern, as 62% of firms cite unclear regulatory guidance. Over half of the firms (55%) are worried about regulatory obstacles, and 54% highlight the risk of bias in AI outputs, which could impact both compliance and trust.

Wealth management firms in regions besides the US are also paying great attention to the innovations brought to the segment by artificial intelligence. It was recently reported that, in the Middle East, sovereign wealth funds, through their specific financial actions, demonstrate an unambiguous desire to become the main sponsors of Silicon Valley developments related to artificial intelligence, investing billions of dollars into promising AI startups.