How AI can help GCC asset managers tap the region’s growing wealth

AI adoption in GCC wealth management firms remains nascent. Getty Images

In the Gulf, one of the wealthiest regions globally, the full potential of transformative AI tools is taking shape, yet remains in its early stages. It is critical for the wealth management industry to ensure that the region’s full potential can be realised by leveraging these tools.

Personal wealth in the Middle East and Africa is expected to reach $7.1 trillion by 2026, though 70 per cent of the fortunes of affluent clients are managed offshore, according to Strategy&, the global strategy consulting arm of PwC. There is a significant shortage of advisers to support the growing influx of wealthy individuals.

Artificial intelligence technologies are disrupting industries worldwide, with media hype touting their game-changing potential while sceptics highlight the risks they potentially pose.

AI adoption in Gulf wealth management companies, however, remains nascent as professionals balance optimism with caution to protect client trust and portfolio integrity.

Yet, AI significantly predates the recent media buzz, with the umbrella term charting a progression since the 1980s, from rule-based models to deep learning, creative outputs and real-time decision making, all of which can be leveraged for wealth management.

This, coupled with the region’s growing wealth, offers a significant opportunity that overly cautious companies risk missing.

In the UAE alone, financial wealth grew by 20 per cent in 2021, reaching $700 billion, with 41 per cent of this wealth held by people with more than $5 million in assets – a sizeable portion of wealth that remains underserved by traditional approaches.

At the heart of much of AI’s potential is that elusive resource: time. The ability to automate administrative tasks such as data entry or report generation, as well as portfolio construction, rebalancing tools, and financial recommendations and execution enhances productivity. Chatbots eliminate the need for employees to answer routine questions.

AI also efficiently delivers tailored services that enhance both client and employee experiences. Hyper-personalisation through deeper, real-time insights into client behaviours and preferences, alongside customised communications and educational content helps advisers and customers make more informed recommendations and decisions.

Personalised training tools and practical hands-on experience for new advisers rapidly accelerate their learning, helping to bridge their shortage in the market.

Finally, AI supports companies’ credibility by automating compliance checks and detecting and assessing compliance risks by identifying patterns and anomalies that can be otherwise missed by human analysts. In sum, AI integration offers superior services without costing precious hours.

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Advocating for AI adoption does not mean ignoring legitimate risks, but rather tackling the challenges that limit companies from realising its benefits.

Risk aversion itself remains a key hurdle, with concerns about data privacy, security, compliance and transparency resounding throughout the sector.

Companies worry about the “black box” nature of some AI models, fearing they cannot fully explain or control AI-driven decisions. That said, transparency within AI models has made considerable progress recently and robust governance and tailored AI models offer greater security and data privacy than third-party systems that employees can turn to without oversight.

While AI regulatory frameworks are still evolving, the region remains far ahead of the global curve, with most Gulf countries designing and releasing proactive AI strategies, including guidelines around ethics and data security.

Limited understanding and unrealistic expectations, which fuel scepticism and fear of AI, hinder adoption, but can be mitigated by recognising that the technology enhances rather than replaces human expertise.

Of course, technological advancements can be challenging to integrate with existing systems, and wealth management firms often struggle with legacy infrastructure. Fortunately, solutions to modernise legacy data are continually improving.

Cultural resistance and market comfort with the status quo also prevent AI use, though companies willing to lead the charge will be viewed as industry pioneers.

However, the most serious risk lies in the reality that AI is already commonplace, with a McKinsey global study finding that the use of AI doubled between 2023 and last year and 55 per cent of respondents regularly use generative AI both in and out of work.

If companies do not proactively adopt AI, employees are likely to turn to unsanctioned applications with the risk of compromising confidentiality agreements or data laws by the inadvertent sharing of sensitive client information.

AI use is inevitable, and only proper governance mitigates such serious breaches and ensures that outputs generated by AI align with company standards and regulatory requirements.

So where does this leave the region’s readiness for AI adoption? The UAE was the first country in the world to appoint a Minister for Artificial Intelligence in 2017, long before ChatGPT became common parlance.

With robust government backing for AI initiatives and substantial investment in education and infrastructure across the region, wealth management institutions in the Gulf are uniquely positioned to lead in AI adoption globally.

Governments are also spearheading implementation, offering wealth management firms a key opportunity to align strategies and leverage public-private partnerships to navigate regulations.

With intentional implementation, Gulf wealth management firms are not only ready for AI adoption but also poised to set the global standard and capitalise on regional revenue in the process.

Alexis Calla is chief AI officer at Alpheya