London-based investment manager Downing has just released new research assessing the impact of artificial intelligence and ESG on advisor businesses.

The development of artificial intelligence (AI) will have more impact on advisor businesses than ESG over the next five years, new research from Downing Fund Managers reveals.

Its study with advisors found that 46 per cent believe AI and its potential to boost efficiency, provide more personalised insight and automation, as well as helping with analysis will have the most impact on the sector over the next five years.

That is ahead of the 28 per cent who believe that ESG investing is becoming more important to investors and regulators and will have the most impact on the sector.

The research was conducted for Downing Fund Managers among 46 general practitioners, specialist and hybrid advisors in the UK in July 2024.

Benefits of AI range from automating repetitive tasks, providing data-driven advice in specific areas such as portfolio optimisation, risk management and tax analysis.

The survey shows that just over a fifth of respondents believe that regulatory changes and tougher compliance standards aimed at increasing transparency, reducing fees and protecting customers will have the most influence on the industry over the next five years.

Downing’s research also found that 9 per cent believe fintech and the predicted growth of passive investing will shape the industry the most, while only 7 per cent point to the growth of alternative investments and private markets.

“It’s fascinating how quickly AI has become such a major issue for advisors. It’s not hard to see how it could work in their world, particularly in helping to fill the advice gap,” Simon Evan-Cook, manager of the Downing Fox range of funds of funds, said. “It also points to advisors worrying about rising competition from AI, and here we think good active products like Downing Fox will help in differentiating human advisors from the next wave of advisorbots.” 

The VT Downing Fox Funds range consists of four funds of funds. Each portfolio differs depending on how much equity, or growth exposure it has, enabling advisors to recommend the option which they feel is most suitable for their client, the firm said in a statement. They are designed to deliver good returns for clients over the long term, without the emotional highs and lows along the way.

Annabelle Bryde, managing director and head of UK Private Bank and Crown Dependencies at Barclays Private Bank, also believes that AI will play an important role in wealth management. “There are a lot of opportunities to take advantage of it in wealth management,” she said. Bryde sees AI as complementing the banker's role, rather than replacing it, helping them to become more targeted. She thinks human-driven advice from wealth managers is here to stay. UBS Global Wealth Management chief investment office (CIO) also thinks that AI is the tech theme of the decade. See more commentary here. 

Downing manages £2 billion ($2.5 billion) of assets under a range of investment mandates across its funds, investment trusts and other products. Its key private market investment areas include renewable energy, infrastructure, and residential and operating real estate sectors. In public markets, it has a boutique of specialist fund managers that provide a suite of investment mandates.