Converging forces have catapulted artificial intelligence (AI) into the mainstream with such a profound impact that it’s been touted as the next biggest disruptive force in global business.
The AI revolution is not in its infancy; in fact, this technology has been around for over 60 years. It has, however, only recently come into its own, disrupting virtually every field of business and even permeating our homes in the form of Siri and Alexa. Still, according to global experts, most of AI’s economic impact is yet to come.
While AI and robotics are emerging as attractive new investment themes, this should not be where family office interest in these technologies ends. As the number of commercial AI-based applications increases exponentially, proactive family offices can harness the potential of this technology, leveraging it for their benefit and capturing the opportunities it presents within their organizations.
As with most technologies, the front-runners in this regard will enjoy the greater advantage. Late adopters, according to the McKinsey Global Institute, may find it difficult to generate impact from AI as they lag in development capabilities and attracting talent.
Of course, no one wants to get left behind, but in the boundless world of AI, where does the family office even begin to consider its implementation?Today In: Leadership Strategy
Automation of tasks
PwC research shows that the most significant potential economic boost from AI is likely to lie in improved productivity. While family offices may not seem to be obvious candidates for AI automation due to their high levels of customization and need for relatively few IT resources, cognitive technology, when strategically implemented, can boost productivity.
AI and Robotic Process Automation (RPA) can be employed to automate routine tasks and augment employees’ capabilities to free up their time, which can then be used to focus on more stimulating and strategic work that adds higher value to the organization. Alternatively, RPA may be harnessed to create high-performance human and robot teams that lead to cost-saving, improved outcomes and higher employee satisfaction.
A fusion of AI technologies and RPA, known as intelligent or cognitive automation, can be used to automate more complex tasks. Functions of cognitive automation include speech recognition, language processing and duties that require perception and decision-making.
For family offices receiving a barrage of unstructured data or investment-related communication, this technology can be employed to process this information, understand it based on the content and action it according to specific pre-determined rules. These actions may include filing, forwarding to designated parties for review, entering important dates into a calendar or alerting management to issues that require their attention.
In addition, with the millennial generation being digital natives, these technologies not only serve to enhance next-generation engagement but also to attract next-generation talent to the family office workforce.
Analysis and Reporting
Today, family offices and organizational stakeholders alike are increasingly demanding access to high-level information and advanced metrics. Likewise, when managing their own investment portfolios, to stay ahead of the curve, family offices require access to reports and predictions derived from advanced pattern recognition and predictive analytics that factor in multiple criteria. This is something traditional tools and analytics models employed by legacy software can’t always offer.
New-generation digital wealth management applications like Kristal use machine learning and data processing to structure information gained from the in-depth analysis of multiple factors, including social and political events, news, social media and more. Based on these outcomes, these applications can be configured so that they automatically effect portfolio rebalancing accordingly. All while users maintain full access to all the data that goes into their portfolio modeling, ensuring complete transparency.
Data creation and storage
For family offices looking to preserve multi-generational wealth, flawless data creation and storage is essential. However, this needs to be done in such a way that the information can be sorted and reorganized to align with current standards. AI can be effectively employed to achieve this.
Strategic decision-making
Insight applications employ advanced analytical capabilities such as machine learning to study and learn from data and market factors affecting the family office. When combined with Big Data insights, machine learning can help family offices to identify significant market trends and critical weaknesses. The efficiency with which danger can be predicted is undeniable. These insights can then be used to inform operational and strategic decision-making processes.
Many companies use these types of predictive algorithms to make strategic decisions that drive growth and profitability. Family offices can use AI to analyze securities and investment decisions as it can improve predictions, reduce errors and enhance efficiency.
When used strategically, AI algorithms not only assist family offices in enhancing their portfolios but can also help to reduce overheads, costs and ensure effective risk mitigation.
Cybersecurity
While artificial intelligence applications can make a family office vulnerable to cyber-attacks, it can also be used to detect and thwart cyber threats and potentially malicious activities. With 20% of family offices reporting having experienced cybersecurity attacks, cybersecurity is a top priority.
Conventional cybersecurity systems cannot keep up with the sheer volume of malware that is deployed on an ongoing basis. Cybersecurity solutions, like IBM’s Watson™, that utilize AI use complex algorithms and make use of pattern recognition to identify threats and provide actionable insights to analysts, are becoming increasingly important in the fight against cybercrime.
AI solutions can also be used in situations requiring multi-factor authentication for user access. In all organizations, including family offices, different users have different levels of access and privileges when it comes to various systems, some of which also depend on the location from which these users are accessing the data.
AI-enabled authentication frameworks offer dynamic, real-time solutions that can modify access and privileges based on the user’s network and location.
The true potential of AI is only just beginning to unfold before us and its full impact is yet to be felt. Still, being aware of how it can be used to transform rather than disrupt the family office and identifying ways in which it can be strategically implemented will ensure that your family office doesn’t get left behind in the future.
This post originally appeared on Francois Botha.
