10 Defining Themes For The Future Of Wealth Management

J. Pierpont Morgan would be proud that many of the historical tenets of the asset- and wealth-management industry still form the bedrock of how money is managed in modern times. The fund’s 150-year track record is a testament to our industry’s founding principle: While the world may change, clients’ desire for investment expertise and personalised service won’t.

With that in mind, here are 10 key themes that we look forward to helping our clients navigate in the future.

1) Price. Ever since I entered the asset-management industry, sceptics have warned that fee pressure will destroy profitability and detract top talent from the profession. Fees in every industry compress at some point. Successful firms of the future will thrive by either providing commodity-like products at scale for near-zero cost, or delivering hard-to-access insights and exposures that command a premium. Our industry must strive for continuous improvement on both ends of the spectrum.

2) Scale is a matter of survival. With compressed pricing, heavy regulatory controls, and immense spend on data, analytics, and risk-management tools, firms need a relentless focus on operational efficiency, a rigorous control framework, and a disciplined prioritization process around investments for the future. In this context, scale is key. Mergers and acquisitions and outsourcing of sub-scale and noncore capabilities to service providers will enable smaller firms to refocus their efforts back into their most important asset: talent.

3) Actively advising clients. If we learned anything from the Covid-19 crisis, it is the need for sound advice in volatile times. During that time, thousands of actively managed funds outperformed their passive alternatives across asset classes and portfolios. While markets may be efficient, manager selection is key and clients need guidance. The average industry return of a balanced portfolio over the past two decades was 6.4% annually, while the actual experience of the average retail investor was only 2.9%, a stark reminder of how critical hands-on advice is.

4) Impact and purpose. Portfolio managers and research analysts have become essential for investors seeking to make an impact in the world through their assets. Over 80% of surveyed CIOs expressed intent to invest in environmentally and socially conscious companies. Analyzing CEOs and their management teams is no longer just about inquiring about their financial and operational expertise and vision, but also about the impact they make on their communities and the planet. Rising demand for companies that drive positive change will create a virtuous cycle of asset allocation for good.

5) Personalization. Today’s investors want to be intentional, not passive, in investing. They care about taxes and want to overweight companies that can make a difference. They want to avoid whole sectors, or actively own and vote on a company’s strategic plans. Giving clients the freedom to pursue their very specific objectives in a highly customized manner will continue to drive innovation in our industry.

6) Stable and predictable incomes. Millions of investors around the world have come to rely on their investment portfolios as a stable source of income. With individuals enjoying longer life spans and more active lifestyles, especially during retirement years, asset managers need to adapt their strategies to provide for a stable and predictable flow of income every month. Along the same lines, saving needs to start at a young age. Today, less than 40% of Americans have enough savings to pay for an unexpected $1,000 expense in cash. It is our collective responsibility to educate and advise on what is required to cover all of life’s events and milestones.

7) Understanding China. The pandemic has highlighted the interconnectivity of the world and how important China is to supply chains and new innovations. Against this backdrop, it is irresponsible to be a fiduciary of client capital and not have a deep understanding of places like China. It is hard to imagine having a true grasp of competitive global forces without on-the-ground insights of the economies, cultures, and politics of re-emerging global marketplaces. After 100 years of being on the ground in China, J.P. Morgan is poised to become the first foreign asset manager to acquire full ownership of a Chinese fund manager, pending regulatory approval. That kind of commitment will contribute massively to our global research network.

8) Technology drives everything. To adapt to the velocity of progress and change, technology is providing our industry access, speed, and agility like never before. With more technologists than Google and Facebook combined, J.P. Morgan invests over $12 billion annually in technology to help empower our clients and employees to work faster and more seamlessly in ever-changing markets. We need to be forward thinking and have the ability to be a disruptor. Agile, collaborative partnerships between technologists and their businesses will drive innovation and speed to market at an exponential pace.

9) Access. With a global footprint and a full suite of investment vehicles, asset managers must continue to focus on enabling first-time investors to invest in previously inaccessible areas. We are finding ways to provide more opportunities, more choice, and more power to people. Investments once only available to the largest investors in the world are now being accessed by the everyday investor. Democratization of markets should create better outcomes for investors of all sizes.

10) A new flexibility. Our industry adapted quite seamlessly to a previously unimaginable work-from-home scenario. As such, increased flexibility will broaden talent pools and should promote greater diversity. While never losing the apprenticeship nature of our business, we should continue to find new ways of working with one another to generate even greater success.

In coming years, the industry’s winners will remain obsessed about their fiduciary responsibilities. As stewards of capital, the ability to leverage technology and scale to deliver the same extraordinary experience for every investor, with $100 or $100 million, is now within reach.

The newly minted Nobel laureate Geoffrey Hinton has a message about the artificial-intelligence systems he helped create: get more serious about safety or they could endanger humanity.

“I think we’re at a kind of bifurcation point in history where, in the next few years, we need to figure out if there’s a way to deal with that threat,” Hinton said in an interview Tuesday with a Nobel Prize official that mixed pride in his life’s work with warnings about the growing danger it poses.

The 76-year-old Hinton resigned from Google last year in part so he could talk more about the possibility that AI systems could escape human control and influence elections or power dangerous robots. Along with other experienced AI researchers, he has called on such companies as OpenAI, Meta Platforms and Alphabet -owned Google to devote more resources to the safety of the advanced systems that they are competing against each other to develop as quickly as possible.

Hinton’s Nobel win has provided a new platform for his doomsday warnings at the same time it celebrates his critical role in advancing the technologies fueling them. Hinton has argued that advanced AI systems are capable of understanding their outputs, a controversial view in research circles.

“Hopefully, it will make me more credible when I say these things really do understand what they’re saying,” he said of the prize.

Hinton’s views have pitted him against factions of the AI community that believe dwelling on doomsday scenarios needlessly slows technological progress or distracts from more immediate harms, such as discrimination against minority groups .

“I think that he’s a smart guy, but I think a lot of people have way overhyped the risk of these things, and that’s really convinced a lot of the general public that this is what we should be focusing on, not the more immediate harms of AI,” said Melanie Mitchell, a professor at the Santa Fe Institute, during a panel last year.

Hinton visited Google’s Silicon Valley headquarters Tuesday for an informal celebration, and some of the company’s top AI executives congratulated him on social media.

On Wednesday, other prominent Googlers specialising in AI were also awarded a Nobel Prize. Demis Hassabis, chief executive of Google DeepMind, and John M. Jumper, director at the AI lab, were part of a group of three scientists who won the chemistry prize for their work on predicting the shape of proteins.

Thinking like people

Hinton is sharing the Nobel Prize in physics with John Hopfield of Princeton University for their work since the 1980s on neural networks that process information in ways inspired by the human brain. That work is the basis for many of the AI technologies in use today, from ChatGPT’s humanlike conversations to Google Photos’ ability to recognise who is in every picture you take.

“Their contributions to connect fundamental concepts in physics with concepts in biology, not just AI—these concepts are still with us today,” said Yoshua Bengio , an AI researcher at the University of Montreal.

In 2012, Hinton worked with two of his University of Toronto graduate students, Alex Krizhevsky and Ilya Sutskever, on a neural network called AlexNet programmed to recognise images in photos. Until that point, computer algorithms had often been unable to tell that a picture of a dog was really a dog and not a cat or a car.

AlexNet’s blowout victory at a 2012 contest for image-recognition technology was a pivotal moment in the development of the modern AI boom, as it proved the power of neural nets over other approaches.

That same year, Hinton started a company with Krizhevsky and Sutskever that turned out to be short-lived. Google acquired it in 2013 in an auction against competitors including Baidu and Microsoft, paying $44 million essentially to hire the three men, according to the book “Genius Makers.” Hinton began splitting time between the University of Toronto and Google, where he continued research on neural networks.

Hinton is widely revered as a mentor for the current generation of top AI researchers including Sutskever, who co-founded OpenAI before leaving this spring to start a company called Safe Superintelligence.

Hinton received the 2018 Turing Award, a computer-science prize, for his work on neural networks alongside Bengio and a fellow AI researcher, Yann LeCun . The three are often referred to as the modern “godfathers of AI.”

Warnings of disaster

By 2023, Hinton had become alarmed about the consequences of building more powerful artificial intelligence. He began talking about the possibility that AI systems could escape the control of their creators and cause catastrophic harm to humanity. In doing so, he aligned himself with a vocal movement of people concerned about the existential risks of the technology.

“We’re in a situation that most people can’t even conceive of, which is that these digital intelligences are going to be a lot smarter than us, and if they want to get stuff done, they’re going to want to take control,” Hinton said in an interview last year.

Hinton announced he was leaving Google in spring 2023, saying he wanted to be able to freely discuss the dangers of AI without worrying about consequences for the company. Google had acted “very responsibly,” he said in an X post.

In the subsequent months, Hinton has spent much of his time speaking to policymakers and tech executives, including Elon Musk , about AI risks.

Hinton cosigned a paper last year saying companies doing AI work should allocate at least one-third of their research and development resources to ensuring the safety and ethical use of their systems.

“One thing governments can do is force the big companies to spend a lot more of their resources on safety research, so that for example companies like OpenAI can’t just put safety research on the back burner,” Hinton said in the Nobel interview.

An OpenAI spokeswoman said the company is proud of its safety work.

With Bengio and other researchers, Hinton supported an artificial-intelligence safety bill passed by the California Legislature this summer that would have required developers of large AI systems to take a number of steps to ensure they can’t cause catastrophic damage. Gov. Gavin Newsom recently vetoed the bill , which was opposed by most big tech companies including Google.

Hinton’s increased activism has put him in opposition to other respected researchers who believe his warnings are fantastical because AI is far from having the capability to cause serious harm.

“Their complete lack of understanding of the physical world and lack of planning abilities put them way below cat-level intelligence, never mind human-level,” LeCun wrote in a response to Hinton on X last year.

10 Defining Themes For The Future Of Wealth Management

A list of new commandments for money management.

Geoffrey Hinton hopes the prize will add credibility to his claims about the dangers of AI technology he pioneered

Thinking like people

Warnings of disaster