How can AI transform financial simulations within wealth management?
Financial simulations are a core part of wealth management, but how can AI transform them to become an even more powerful tool for investors?
Simply put, Radomir Mastalerz – the co-founder and CEO of award-winning, easy-to-use, and affordable wealth management platform WealthArc – believes that AI-powered financial simulations are “ushering in a new era of personalised financial advice.”
For the uninitiated, financial simulations are computer models that attempt to create predictions of financial markets. Through these models, investors can gain insights into potential outcomes of companies and how their value might be affected. These models could be used to forecast a company’s financial situation or predict the success of a portfolio in mock markets. Monte Carlo is probably the most well-known model, but there are countless simulations used to help wealth managers improve their decision-making.
Mastalerz commented, “Machine learning models were used for decades to model markets and predict their movements. Today, they are much more powerful. Through advanced algorithms and data analysis, AI can process vast amounts of historical and real-time financial data, enabling more accurate predictions and risk assessments. This precision empowers wealth managers to make informed decisions and optimise investment strategies.”
On top of this, by incorporating advanced algorithms and data analysis, wealth managers can enhance their offerings to customers. Personalisation has become a vital differentiator for advisors. The digital world has created a heated battleground, where customers are happy to switch providers for more engaging and personalised experiences. While having easy-to-use apps and proactive engagement messages are vital, leveraging AI within financial simulations is an important piece of the puzzle.
A recent podcast from WealthTech company Kidbrooke warned that firms that fail to offer their customers helpful financial simulation services could lose customers now or in the next financial crisis. The current economic climate has put pressure on finances and retail investors are likely to be worried about how their finances could be impacted. Making financial simulations available to them would go a long way to help them feel more confident about the future and allow them to readjust their risk appetite.
Even if a wealth manager does not make these simulations available to customers, an AI-powered financial simulation would help advisors ensure they provide better support to their clients.
“AI enables financial advisors to provide more personalized advice by considering individual client profiles, risk tolerance, and financial goals,” Mastalerz said. “AI can generate tailor-made simulations that align with each client’s unique circumstances. This personalized approach enhances client satisfaction and strengthens long-term relationships.”
The final way that AI can transform financial simulations is by improving the democratisation of wealth management. “Personalised financial advice, available in the past only to High-Net-Worth Individuals, is becoming affordable for retail investors due to AI-supported financial planning. Moreover, LLMs (Large Language Models) make financial advice easily accessible through natural language.” Before the widespread adoption of AI-powered technology, an advisor would need to spend a lot of time analysing data to provide personalised insights for customers. This made their advice expensive and only attainable for the wealthy.
However, AI has made it possible for advisors to quickly get insights and even build detailed portfolios for customers. This allows an advisor not only to support low-net-worth individuals but also to serve more clients.
Mastalerz concluded, “AI’s transformative potential in financial simulations within wealth management is undeniable. Enhanced analysis, personalization of financial advice and democratization of wealth management services are just a few ways AI is reshaping the landscape.”
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