As artificial intelligence continues to reshape the financial landscape, AI-powered wealth management tools are becoming essential, especially for younger generations facing the great wealth transfer – the baby boomers’ trillion-dollar transfer to younger generations over the next 20 years.
We asked CJ Follinirecognized expert in asset management and millennial wealth management and an adjunct professor at NYU with over 30 years of experience in finance. He is also the investment director of NOYACK Alternative investments, managing over $1 billion in assets under management with diverse asset management experience.
Noyack Wealth Club, Follini’s nonprofit foundation, has spent the last two and a half years building a Small Language Model (SLM) designed to be a personal wealth management co-pilot. – not an advisor – especially for the Great Wealth Transfer cohort of Millennials and Zillennials. Below, he offers a unique perspective on how AI can be leveraged to drive long-term financial empowerment for younger generations.
Q: What is the Great Wealth Transfer?
A: The Great Wealth Transfer refers to the unprecedented transfer of approximately $38.4 trillion from baby boomers to younger generations, primarily millennials and Generation Z, which is expected to occur by 2045. This massive transfer wealth is already underway, with millennials expected to inherit $4.4 trillion. by 2025 only. This transfer is expected to continue increasingly over the next two decades:
- 2021-2025: 4.4 trillion dollars
- 2026-2030: $5.6 trillion
- 2031-2035: 7.5 trillion dollars
- 2036-2040: 9.5 trillion dollars
- 2041-2045: 11,400 billion dollars
This change is having a significant impact on financial markets as young investors take control of significant assets. These generations start investing earlier than their parents, with 31% of millennials starting investing before age 21, compared to just 9% of baby boomers. Additionally, Millennials and Generation Z spend 3x more on private investments than previous generations, demonstrating a stronger inclination toward private markets.
Q: How are AI-powered tools changing wealth management?
A: AI-powered tools are transforming wealth management by automating tasks, improving personalization, and democratizing access to sophisticated financial advice. These tools analyze large amounts of data to provide tailored investment strategies that meet the specific needs and objectives of individual investors.
Millennials and Generation Z, who are generally more comfortable with technology, are particularly attracted to AI-based platforms for managing their wealth. These tools allow them to navigate complex private markets, improve their financial knowledge, and independently manage their investments in a way that was previously only accessible to high-net-worth individuals.
Q: What are the benefits and challenges of using AI for wealth management?
The advantages:
- Personalization: AI delivers highly personalized financial strategies based on an individual’s goals, behavior and real-time market data, ensuring dynamic and tailored recommendations.
- Efficiency: By automating routine tasks, AI improves efficiency, reduces human errors and accelerates decision-making, helping users manage their portfolios more effectively.
- Democratized access: AI brings sophisticated financial services that were once reserved for the ultra-wealthy to a wider audience, allowing more people to access wealth management tools.
The challenges:
- Complexity: AI-based financial tools may be intimidating or difficult for less tech-savvy users, requiring better educational support.
- Trust issues: Some investors are hesitant to fully trust AI systems, especially for major financial decisions, because they still value human oversight and relationship building.
- Privacy issues: AI platforms often require access to sensitive financial data, raising concerns about data security and privacy protection.
Q: How are millennials and Gen Z using AI for financial knowledge?
Millennials and Generation Z are leveraging AI-powered applications and platforms to improve their financial knowledge and develop smarter investment strategies. Prediction: This demographic will have the largest percentage of self-directed wealth management in history by 2027. AI-based personal wealth management co-pilots, like the one developed by weareNOYACK.com, and robo-advisors offering automated financial planners. help them:
- Track expenses
- Learn the basics of investing
- Building diversified portfolios
- Access personalized information and tutorials on financial concepts
Many young investors appreciate the educational resources offered by these platforms, which provide personalized information and make financial decision-making more engaging. AI aligns well with their digital-native tendencies, making financial education more accessible and less intimidating.
Q: What is the future of AI-enhanced wealth management?
Even as AI transforms the wealth management landscape, it is unlikely to completely replace human financial advisors. Instead, the future of wealth management should involve a hybrid model in which AI complements and enhances the capabilities of human advisors.
AI excels in automating data analysis, routine tasks and personalized portfolio management. However, human advisors remain essential for navigating complex financial situations and offering relational and emotional insights that AI cannot replicate. Advisors will focus on building relationships, managing more complex scenarios and providing holistic financial planning, while AI handles the data-driven aspects.
The future of AI-enhanced wealth management lies in creating an even more seamless and personalized user experience. AI tools are expected to become more sophisticated, with the ability to:
- Predict market movements more accurately
- Rebalance portfolios in real time
- Offer hyper-personalized financial education
This will make wealth management more intuitive and accessible, especially for underserved populations such as young investors or those new to private markets. As AI improves, we may also see improved natural language processing capabilities, enabling more intuitive interactions between users and their AI financial advisors via voice commands or real-time chat.
Q: How does AI help with 401(k) plan administration?
A: AI is increasingly being used to help employers and plan sponsors administer 401(k) plans. These AI tools can:
- Streamline plan management
- Optimize registration processes
- Provide personalized recommendations to employees based on their financial situation and retirement goals
For employers, AI helps analyze participation rates, identify trends and suggest ways to improve engagement, while automating much of the paperwork involved in administering plans. For employees, AI offers personalized advice on contribution rates, investment allowances and retirement preparation. By leveraging AI in 401(k) plans, employers and employees benefit from increased efficiency and personalized support.