Some vendors of digital wealth management platform solutions offer XAI capabilities that can demonstrate to advisers how automated advice and recommendations are in their client’s best interests.
2. Explain their recommendations more efficiently.
AI systems are analysing large datasets and generating insights at a scale faster than human can. Financial advisers receive these insights, but they themselves are not data scientists.
To drive adoption, firms use XAI to tag recommendations with explanations to advisers, increasing the likelihood that they will pass the recommendation on to their clients.
3. Have more confidence when dispensing advice because of better risk management and compliance.
Regulatory action is imminent. The EU recently passed the first major act to regulate AI. And section eight of US President Biden’s executive order encourages agencies to consider rule-making “related to the transparency of AI models and regulated entities’ ability to explain their use of AI models”.
In response, forward-looking wealth management firms are enhancing their AI models with XAI to remain in compliance with regulatory and ethical standards.
Winning firms are infusing XAI into all aspects of their digital business strategy. Enterprise wealth management firms have multiple AI models and initiatives.
To ensure that there is a cohesive, holistic vision leaders should understand all downstream impacts of the interoperability of the models and tie each model’s performance to tangible business metrics, such as retention rates, assets under management, and customer satisfaction.
Taking these steps will give business, technology, and compliance leadership greater confidence in the outcomes and avoid potential regulatory action.
The successful adoption of AI in wealth management requires alignment of multiple factors – and an effective XAI capability is the most critical.
Without proof that AI is acting in their clients’ best interests, wealth managers will have to pull back on their AI aspirations until they can deliver an 'objective adviser' through careful deployment of a full suite of AI capabilities.
Vijay Raghavan is a senior analyst at Forrester
