How artificial intelligence is reshaping portfolio strategy, wealth allocation, and investment advisory

To the best of our knowledge, this is the first paper that highlights the impact of artificial intelligence (AI) on three main areas of wealth management: portfolio strategy, portfolio construction, and advisory, and how it is changing the landscape and tradition of one of the oldest professions in history. Therefore, we aim to shed some light on the influence of AI on portfolio strategy, wealth allocation, and investment advisory and raise several important questions and considerations while pointing to the opportunities and challenges that AI poses on this field which has not received much attention yet. As with other sectors of the economy, wealth management is also undergoing a significant transformation caused by digitalization and disruptive technological innovation (Lunkkadd & Bhandari, 2023; Martin et al., 2023). People move from offline to online in every aspect of collecting and exchanging information, as well as in executing transactions related to banking, wealth, and insurance management. Today, many traditional banks and wealth managers compete with so-called fin-techs that offer new technological driven solutions. In order to adapt, survive, and prosper in this fast changing environment, traditional banks and wealth managers are required to revamp and rethink their strategies related to portfolio management and advisory. Technology is seen as a key driver for differentiating offerings, enhancing efficiency of operations, and improving customer experience. Improving customer experience is important, because customers revenue generation is shrinking driven by a decline in profits interests and high levels of competitiveness. New sources of revenues and value creation must be pursued, which could lead to a more profitable business model. Recently, the rise of artificial intelligence has radically shifted the components and characteristics of the technological landscape and its importance in the business decision making. AI promises to enhance decision making in several ways, supporting financial analysts and advisors in their recommendations and allowing investment solutions to be achieved faster, at lower costs, with higher margins, as well as be more informed and controlled.