From investment advice to personalised communication: AI’s role at JPMorgan and Morgan Stanley

JPMorgan Chase recently filed a trademark application which suggests the financial services giant plans to begin providing investment advice to customers using AI.

According to the filing, JPMorgan intends to incorporate “cloud computing software using artificial intelligence” as part of a new service dubbed IndexGPT for the purpose of “analysing and selecting securities tailored to customer needs”.

Similar to OpenAI’s popular chatbot ChatGPT, the filing indicates the AI behind the IndexGPT service would be based on “Generative Pre-trained Transformer models” but with a focus specifically on the field of financial services.

AI tools such as ChatGPT have already found a place in a range of financial advice firms in Australia and are expected to become even more commonplace in the future.

However, the recent rise in popularity of AI has prompted warnings about the risks of relying on the technology, including the potential for ChatGPT to generate fabricated information.

According to JPMorgan CEO Jamie Dimon, AI is an “extraordinary and groundbreaking technology” that has already added significant value to the company.

“AI and the raw material that feeds it, data, will be critical to our company’s future success – the importance of implementing new technologies simply cannot be overstated,” Mr Dimon wrote in his annual letter to shareholders back in April.

The firm currently has more than 300 AI use cases in production today with a team of over 900 data scientists, 600 machine learning engineers and 1,000 involved in data management, as well as a 200-strong AI research team.

But JPMorgan is not the only major US financial institution exploring the possibilities of AI – especially in terms of its potential use cases in the provision of advice.

Advisers at Morgan Stanley have already been utilising an internally built AI-based tool called ‘Next Best Action’ for the past five years to facilitate personalised communication and recommendations for clients.

Jeff McMillan, head of analytics, data & innovation at Morgan Stanley Wealth Management, recently explained how the tool works at the Stockbrokers and Investment Advisers Association (SIAA) 2023 conference.

“It’s not prescriptive. We give a buffet, if you will, of ideas to our financial advisers and they can either pick up the phone and talk to their clients about those ideas or they can digitally engage their clients in scale,” he explained.

As an example of how an adviser might use Next Best Action, Mr McMillan described a scenario in which the stock market dropped by 4 or 5 per cent.

“They could literally hit a button, and for every client that had a financial plan, they would be able to send a customised email saying, ‘Hey Matt, just want to let you know, the market was down 4 per cent, your portfolio was down – fill in the blank – 2.2 per cent, and that’s primarily driven by the following asset allocation, and based on my review of your plan, you’re currently over 90 per cent probability success, which is where we want to be. Have a good evening’,” Mr McMillan said.

“To be able to do that in a completely customised way to 100 clients in about two and a half minutes, we found this hugely value added, and the analogy I use is – and I’m talking about your professions here – who doesn’t want a free resource that knows every product at the firm and is going to follow you around all day and is going to recommend ideas to you while you talk to clients?”

Mr McMillan said Next Best Action had been a “massive driver” behind some of the success seen at Morgan Stanley in recent years. Over 90 per cent of the firm’s 16,000 advisers reportedly use the tool on a monthly basis.

In terms of how well the tool has worked since its introduction five years ago, Mr McMillan suggested improvements had been seen across every metric.

“If you’re in the business, you’re serving your top ten clients really well. What we’re finding is that the next 90 or 100, or whatever it may be, that maybe you're not serving them that well,” he suggested.

“By simply digitally engaging them on a consistent basis, you see higher net acquired assets, you see higher client satisfaction, you see higher retention rates, every metric.”

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.