Family office investment in AI is growing, but operational adoption remains low.
According to the Citi Private Bank Global Family Office 2024 survey, more than half of family offices are diversifying their portfolios with artificial intelligence (AI), investing in technology stocks, AI start-ups and private equity funds. However, internal adoption of this technology remains timid. Less than 10% are using AI to automate their processes or for strategic tasks such as risk analysis or portfolio optimization.
This caution can be explained by the conservative nature of family offices, primarily focused on protecting family assets over the long term. While AI offers theoretical advantages in portfolio management, the risks associated with implementing an emerging technology are perceived as too high. For example, data privacy issues and fears of potential security breaches are holding back rapid adoption. Family offices have ultra-sensitive assets to manage, so they have to scrutinize every new technology before it is integrated.
The lack of in-house technical skills is also a hindrance. Many family offices, often smaller than large-scale financial institutions, lack the resources to recruit experts capable of overseeing the implementation of AI in-house. As a result, these entities typically outsource the management of these technologies to specialist providers, limiting their control over their use and potential.
Family offices, while cautious, understand that artificial intelligence is likely to be a key long-term evolutionary factor for wealth management. The use of AI could enable better risk management, particularly in predictive analytics, multi-generational asset management, and large-scale portfolio optimization. AI tools, if properly integrated, could facilitate more personalized asset management and improve investment strategies, particularly for structures operating in complex international markets.
For the time being, then, the adoption of AI is mainly through investment in specialist companies, leaving its direct application within family offices to one side. However, as the technology evolves and evidence of its effectiveness accumulates, it is likely that these entities will evolve their practices and gradually integrate AI into their operations. This is a pragmatic approach, where family offices prefer to take the time to understand and master the technologies before applying them to their internal processes.
In parallel, family offices will continue to keep a close eye on advances in AI, while investing in companies and funds that capitalize on these innovations. This allows family offices to benefit indirectly from the potential benefits of AI, while reducing their exposure to the risks associated with premature integration.
To sum up, although family offices are stepping up their investments in artificial intelligence, they are still a long way from adopting this technology on a large scale within their own operations. The future of AI in this sector will depend on its ability to offer concrete, secure and personalized solutions, in line with the priorities and values of these wealth managers.
Source: Citi Private Bank Global Family Office 2024 Survey, quoted in Spear's Wealth Management...
Photo: Luke Jones via Unsplash
This post was translated from the original French.