Singaporeans Grow Confidence in AI-Powered Wealth Management

Artificial intelligence (AI) is a fast-emerging technology that is changing every industry. As one of the drivers of digital transformation, AI integrates digital technology into all the business aspects, significantly changing the way businesses are run and offer value to customers. In Singapore, the high-net-worth individuals (HNWIs) are starting to adopt AI as a means of investment decision-making. But what’s behind this trend, and how can investors understand the growth of AI-based wealth management?

Younger Clients Taking the Lead

A new study by global tech and management consultancy Capco shows that Singaporeans are increasingly at ease with wealth management through AI, with younger clients taking the lead. Based on the survey, 76% of those below the age of 35 are at ease with AI making decisions on their wealth management. In comparison, only 42% of those aged 45 and older feel the same way.

In spite of such a stark generational difference, it is interesting to note that a high proportion of older clients themselves feel comfortable with the idea. Altogether, 59% of Singaporeans of all ages said they were comfortable to rely on AI in their wealth management. Even more surprisingly, 15% said they felt “very comfortable” with relying on AI for investment advice.

Receptive to AI

Though highly comfortable with AI technology, people lack correspondence between acceptance and application. Three-quarters of respondents are not yet even using robo-advisory services even though almost half said they would “likely” start doing so and 17% “very likely”. This reflects a disparity: while customers embrace AI-based decision-making on theory, they still have not totally applied it.

Is the idea of AI for wealth management appealing, but lacking the tangible benefits necessary to drive immediate action? Or is it the unfamiliarity of the technology that prevents clients from fully investing in it?

Taking Away the Hurdles

As Singapore increases its adoption of AI in finance, there are several challenges left to be addressed. Regulatory approval is perhaps the biggest challenge of them all. For wealth management using AI to go mainstream, it will need to adhere to local regulations, guidelines on investment suitability, and other compliance requirements.

At this point, it is not entirely certain how AI-directed wealth will vary from current robo-advisory services. While robo-advisors provide investment guidance based on algorithms and user data, AI has the potential to do more, like scanning vast amounts of data in real time to provide even more advanced insight. But how quickly robo-advisory services transition into AI-managed wealth will very much depend on securing the right regulatory approvals.

What If AI Decisions Go Wrong?

The most important question is still unanswered: what if AI-based investment decisions are wrong? To date, no Singapore wealth management clients have lost or made large amounts of money because of AI-based decisions. But if this were to occur, the atmosphere could change dramatically.

If customers were to lose money due to AI-driven advice, it would attract complaints and regulatory attention. What would wealth managers and banks do in such cases? The natural default reaction would be, “the AI did it,” but this response may not be the best way to deal with the nuances of the case.

Not Yet Clear

Singapore is leading the way in AI adoption in wealth management, and most investors are willing to embrace AI tools. With technology becoming increasingly sophisticated and regulatory environments adapting, we might witness more investors embracing AI-based investment strategies.

While AI does hold immense power to revolutionise wealth management, it is important to remember that human touch is an integral part of the process. A good wealth manager is able to read between the lines of a client’s values, fears, and goals and deliver customised solutions that take into account both the financial and emotional aspects. It especially crucial in situation like estate planning, retirement choices, or when clients are going through times of uncertainty. Merging the effectiveness and data-based analysis of AI with the compassion and experience of an adviser could be the secret to the future of wealth management.

For the time being, the path from AI comfort to complete acceptance is an interesting one. Whether you are a new investor or a seasoned wealth manager, it’s crucial to keep yourself updated on the advancements in AI-based wealth management solutions.

Disclaimer:‍‍‍‍‍‍ Investment carries certain risks. You should not just rely on results as an indication of your financial needs. You should understand and familiarise yourself with any investment and the associated risks before investing. You are also recommended to seek professional advice before making any decision to buy, sell or hold any investment or insurance product. The views and thoughts expressed in the post belong solely to us, and not to Manulife Financial Advisers Pte Ltd, or any other group of individuals.