We see a lot of articles on how Artificial Intelligence (AI) is transforming or disrupting various industries. A lot of these transformations apply to any industry or sector. So, the automation of back-office processes or using the latest LLM-built chatbots for improved communications with customers will help a bank, an energy company, or a toy manufacturer.

Occasionally these articles zoom in on sectors that we are particularly interested in like Wealth Management. A couple of interesting recent examples are:

  • Yahoo Finance article titled “AI will bring ‘carnage’ to wealth management, strategist says”. It argues that AI will disrupt the wealth management industry by enabling low-cost and high-quality robo-advisors to replace human advisors. This will force smaller companies to consolidate and spend heavily if they want to remain competitive. To back this finding, the article refers to a recent PwC survey predicting “that 1 in 6 asset and wealth management companies will be bought or shut down in the next five years”.
  • Blackrock article titled “How AI is transforming investing”. It details how large fund managers have evolved to using LLM-like Transformers to analyse text sources and generate return forecasts. It is an interesting read that provides a primer into how these quantitative portfolio allocation and management tools work and what is the state of the art for large Wealth Managers.

We don’t agree with everything that these articles say or how they are positioned. For example:

  • It may be fair to say that robo-advisors can replace humans for customers who are highly digital native and content with passive investment. However, many customers still want (and will continue to want) personalised human attention and individual portfolio construction and management.
  • While it is fascinating and impressive how well Transformers appear to predict future returns, customers still want (and will continue to want) to invest in more traditional products based on Value, Growth or passive strategies.


One thing that both articles have in common is the relevance of scale. Scale is necessary to spread the costs of robo-advisor development across more customers. Scale also enables you to have the brainpower and skills to build the best predictive models and algorithms.

This does not mean that smaller Wealth Managers are doomed to fail or be consolidated. But it does mean they should start thinking about how they can adapt to and benefit from AI.

This can be as simple as starting to use AI to do more straightforward tasks (e.g. LLM-generated job descriptions or AI-produced meeting transcripts) or using AI to augment/speed up your internal work (e.g. see our recent article on policy writing).

At the same time, smaller Wealth Managers should define which parts of the business they want to be in the longer term and how (e.g. they may decide to distribute the best third-party Quant products, but keep other portfolio management capabilities in-house). They should also continuously monitor what AI solutions are available in the market for their size and type of business (new solutions are constantly coming out, so this cannot be a one-off exercise). For example, a quick search yields various third-party tools like AlphaSense or Kensho that a small Wealth Manager could trial in order to better predict future returns (Note: we have not tested these tools ourselves, so this is not an endorsement).

How this plays out will in part depend on the quality of tools that get developed over the next few years and how well the smaller Wealth Managers adapt to the changing environment. Wealth management clients are often loyal and a lot of the demographic is unlikely to change in the short term, but Wealth Managers should always be looking ahead.

Hay un concepto del que ahora se habla continuamente: el de la “digitalización”. Las entidades financieras están inmersas en una dura carrera, en realidad una auténtica maratón, para adaptarse a las exigencias que la digitalización implica.

Una de las últimas propuestas relativas a esta idea tiene que ver con la creación del “euro digital”, una forma de dinero que emitiría el Banco Central en un formato estrictamente digital, sin soporte físico (https://www.ecb.europa.eu/pub/pdf/other/Report_on_a_digital_euro~4d7268b458.en.pdf). Su impacto podría ser semejante al que tuvo en su momento la introducción de la moneda por los griegos, una innovación que dio origen a un nuevo sistema con un conjunto de características y reglas propias diseñadas para hacer que la población confiara en él y lo utilizara en su vida diaria.

Hay algunas preguntas que rápidamente vienen a la cabeza para poder entender y definir el alcance del cambio:

  • ¿Cómo se verán afectadas las entidades financieras?
  • ¿Podrán los clientes minoristas acceder directamente a estas monedas? Si éste fuera el caso, ¿perderán los bancos la función de intermediarios financieros?
  • ¿Cuál será la infraestructura y el diseño funcional de la nueva forma de dinero?

Se estima que se tomará la decisión acerca de si se emite este tipo de moneda hacia mediados de 2021. A partir de ese momento surgirá el proyecto de implementación que podría durar un mínimo de 2 años.

La experiencia en otros grandes programas de adaptación a una realidad cambiante, como la transición de las referencias LIBOR en el que Projecting ha colaborado tanto en UK como España, permite anticipar un esquema de líneas de trabajo (“workstreams”) que habrán de incluirse en la estructura del proyecto de implantación:

  1. Legal: El euro digital plantearía diversas cuestiones legales, involucraría nuevos documentos y políticas legales, así como revisar los existentes.
  2. Negocio: Qué áreas están afectadas. Este punto ayudará a identificar los actores (“stakeholders”) clave que estarán involucrados en el proyecto.
  3. Contabilidad: ¿Supone algún cambio a la hora de contabilizar?
  4. Operacional: Desafíos importantes pueden surgir alrededor de la nueva infraestructura requerida. Hay que identificar qué sistemas y procesos están afectados, qué nuevos desarrollos y tecnologías serán necesarias. Ambas formas de dinero (las existentes hoy en día, así como el nuevo euro digital) convivirían, implicando que los procesos y sistemas para ambas tendrían que coexistir y confluir.
  5. Cumplimiento y blanqueo de capitales: Los pagos usando euro digital deberán respetar las normas de lucha contra el blanqueo de capitales y evasión fiscal.
  6. Comunicación: Qué mensajes hay que enviar a los clientes fuera de la organización (a través de la página web, carta, telefónica, …)
  7. Riesgo cibernético: Desafíos técnicos conllevan riesgos cibernéticos. Revisar la gestión de los mismos formaría parte del proyecto.

Los actores del sistema financiero deben estar preparados para este cambio y prever en la medida de lo posible sus impactos, así como planificar en que consistiría el gran proyecto de integración, implementación y adaptación a esta nueva forma de dinero.

The 2018 FCA Platform Review interim report highlighted that the challenges of the costs and charges reporting requirement due in January 2019.

Those of you trawling through Waterstones best sellers and bargain books (other book shops are available) may not have stumbled on the FCA Business Plan 2018-19.

You may be under the impression that after the excitement of MiFID II and GDPR, there is a lull. Indeed, there appears to be a period of grace but this, unfortunately, is a false dawn. The business plan outlines some 12 reviews, 8 publications and numerous other activities across all financial services.

Some of the “highlights” include the proposed Suitability Review 2019. A follow-up version of the highly successful 2017 review.  (Is it me or do we seem to be following the same naming convention as the FIFA video game?)

The thematic priorities, which will have diverse methods of addressing and review, are:

  • Culture and governance
  • Financial crime and AML
  • Data security, resilience and outsourcing
  • Big data and fintech
  • Treatment of existing customers
  • Pensions
  • High cost credit

Key priorities within these themes are finalising the rules of the Senior Managers and Certification Regime and monitoring the roll out of technology and resilience as part of the Open Banking and the second Payment Services Directive (PSD2) (with the ability for third party providers to access a client’s data and make payments, this will be an important test of the security of this directive).

Introspectively, the FCA are also testing and applying RegTech and advanced analytics to the approach to regulation which may open the door for firms to move to similar schemes. Also, the FCA will be creating a Memorandum of Understanding with the Information Commissioner’s Office. This may lead to a focus in certain reviews and questionnaires on data security.

We have not heard the last of MiFID II either and, although to date, a collaborative approach has been taken, we may see considerable more depth to the monitoring, particularly transaction reporting and the inconsistent approach to research costs.

So, enjoy the summer’s fine weather, holidays and sport and look forward to the next year or two’s regulation with a spring in your step and a passport in your hand (Brexit allowing of course).

As more details become available on each of the areas, we will publish a short pragmatic guide on what they mean and what you will actually need to do.