Fiduciary managers are yet to deploy artificial intelligence (AI) to its full potential, despite 85 per cent using the technology, research from Isio has found.

Its study of fiduciary management firms showed that their use of AI was limited to automating lower-risk operational tasks for increased efficiency.

The most common way AI was used was for drafting internal memos and summarising commentary (91 per cent), reviewing legal documents (73 per cent) and coding (64 per cent).

Fewer than one in 10 (9 per cent) fiduciary managers using AI did so for trading client assets.

Isio said that current levels of AI usage reflected the nascency of fiduciary managers’ AI strategies, which were still developing, and just 23 per cent had a detailed AI strategy in place.

Although the majority (62 per cent) had early-stage plans to integrate AI into their business operations, 8 per cent had no AI strategy and no plans to develop one.

While AI was not being used by fiduciary managers to make independent trading decisions, Isio noted it was likely that some underlying funds were already using AI in this way.

The firm believed that while AI was currently focused on back-office efficiency, it could “fundamentally change” how fiduciary managers support and execute investment decisions.

These decisions included stock selection, with AI being used in some funds to actively manage stock selection, and adoption was expected to grow as costs fall and AI models become easier to run in-house.

Isio also pointed to fund selection, emphasising that fiduciary managers had some of the most extensive data on a wide range of funds and were well placed to use this data with AI models to make better fund selection decisions.

Finally, the firm highlighted portfolio construction, which it argued was the area furthest from effective AI operation and raised questions about how far the technology can be effectively applied to give individual investors an ‘edge’.

“We are seeing fiduciary managers enthusiastically adopt AI in their businesses,” commented Isio head of fiduciary clients, Anthony Webb.

“At the moment this means augmenting existing processes, aiming to make things more efficient and the benefit for clients will be felt as cost savings.

“But we are rapidly approaching a stage of new AI capabilities which could lead to greater AI integration and potentially changing how decisions are made and based on much broader datasets.

“While we believe that AI will be transformative over time there are also fundamental limits to what it can achieve in investment markets and, in a world of buyers and sellers, there is no magic solution to make us all rich.”

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