Paul Whelan, director at family-owned Swiss bank Mirabaud discusses with this news service the future of wealth management, looking at the potential of AI, as well as the market outlook and the role of private equity within the wealth space.
Paul Whelan at Mirabaud thinks human-driven advice from wealth managers is here to stay, despite predictions for a number of years that the future of wealth management will see the rise of artificial intelligence and robotic advice.
According to Whelan, AI will play a role in wealth management. There will be more automation, he said, but he thinks that it will be near impossible to provide personalised advice to clients through AI. Client demand to keep with wealth managers is strong, adding value to the service, as part of a long-term relationship, Whelan said.
“Regulation has also increased which makes it more complicated to provide advice,” he continued in an exclusive interview in London last week. The hope is AI will augment wealth managers’ role, and empower them to do more high-value tasks that build revenues.
Benefits of AI range from automating repetitive tasks, providing
data-driven advice in specific areas such as portfolio
optimisation, risk management and tax analysis. In agriculture,
AI enables farmers to monitor crops more effectively, reduce
errors and minimise the risk of crop failures, for example. See
here other articles on AI.
Switching focus from AI, Whelan talks about equities.
Despite the challenging environment, Whelan is cautiously optimistic about the outlook for equities. “We are effectively neutral, but we think we have got through the worst of it. The macro-economic environment is more positive than 2022, when every asset class dropped across the board for the first time,” he said. “Inflation is coming down, although question marks remain about how far it will fall as well as about the war in Ukraine,” he added.
He highlighted how private equity is a great diversifier in a volatile market for certain clients. “However, the outlook is more challenging, in view of the higher interest rates,” he said. “There is opportunity but investors need to proceed with caution. The share price of private equity big-hitter Blackstone has fallen 28 per cent in the last year, for instance, but there are still some great opportunities to be had for the longer term, depending on the client,” he continued. “We invested in Moderna at an early stage for example,” he said. “But it’s probably best not to invest more than 20 per cent of an average client’s portfolio in private equity” he added.
“For years, bonds haven’t been great with low rates but they can be a good diversifier and they have become more attractive with the increasing interest rates,” he continued.
“There’s also been a bit of a flight to gold, following the banking turmoil earlier this year, which saw the collapse of Silicon Valley Bank and Credit Suisse,” he said. He believes that the crisis has been mostly contained, adding that Mirabaud was well positioned through the turbulence owing to the firms high capital ratios.
“JP Morgan, for example, has done really well out of it [bank turbulence] too. People go to higher quality, more robust institutions. Nevertheless, some smaller US banks could be affected by it whilst European banks appear to be more protected,” he said. “Long-term, there could be a more regulatory focus about how this happened,” he said. Whelan is cautiously optimistic about the outlook for emerging markets on a long-term basis.
“India and China, in particular, are continuing to do incredibly well but the stock prices aren’t keeping track,” he said.
“Gold and precious metals rely on emerging markets, for instance, which we put in our portfolio. Demand is continuing to soar and we expect those asset classes to do quite well. However, governance is still a concern which is why, in my view, we haven’t seen stock markets rise as they should have done,” he continued. “Japan is meanwhile one of the most under researched markets but there should be some gems to be had there."
“We are positive about Europe long-term but again there is a question mark around Ukraine as Germany has been hit hugely by that. Volkswagen’s share price, for example, has been massively hit. It will be interesting to see how the European Central Bank raises rates and how that plays out,” he added.
“There are also some question marks around the UK due to the Brexit impact on trading. The UK stock market has done well in the last couple of years, mainly due its mining and oil companies which have done pretty well but there are question marks on trading rules. When there are question marks, investors will go elsewhere,” he said.
“We are globally diversified, and we are optimistic about the US
outlook,” he added. “We think technology will do well as it’s a
growth sector and that’s where you get true innovation. Going
forward, businesses like mining will continue to do well due to
electrification, for instance,” Whelan concluded.