Morgan Stanley's probe updates, right AI for wealth, and more. — WealthTech Fusion, 12 Apr.

Welcome to our weekly newsletter. Here, key events from the Wealthech universe converge to meet your curiosity. Subscribe and enjoy!

What’s in:?

• Now, more regulators’ eyes follow Morgan Stanley’s wealth management division probe.
• CapIntel and IG Wealth Management agreed to continue their partnership.
• Kidbrooke, WealthArc, and Aiviq executives share recommendations on choosing AI solutions for wealth management.
• Wolters Kluwer has launched an AI tool for U.S. community banks and credit unions.
• Avenir nets half a million dollars pre-seed.

Let’s start from this week’s focus: the Federal Reserve looking into Morgan Stanley’s wealth management division processes.

摩根士丹利 's wealth management division is under investigation by three more US regulators: the Securities and Exchange Commission, the Office of the Comptroller of the Currency, and the Treasury.?

The Federal Reserve was already investigating Morgan Stanley's money laundering controls in wealth management. Now, there will be further inquiries into how the bank handles potentially risky clients, particularly examining the thoroughness of investigations into clients' wealth sources and financial activity.?

While probes add to the sequence of negative developments the bank faces, they also spur new ones.

• Morgan Stanley's stock fell 5.3% following the news of the broader probe, as The Wall Street Journal reported.
• The downward trend also caught the bank's wealth management growth, an essential aspect of former CEO James Gorman 's strategy. The increase has recently slowed due to higher interest rates. Morgan Stanley warned earlier this year that the division may fall short of its profitability target.

These new probes are a new item on Morgan Stanley's list of existing regulatory challenges, including a previous federal investigation into its block trading business that resulted in a $249 million settlement.

?? Release, please

Wolters Kluwer Compliance Solutions has launched OneSumX Reg Manager, an AI-powered solution for U.S. community banks and credit unions to improve their regulatory change management.?

This tool is part of the OneSumX portfolio suite and is designed to help smaller financial institutions navigate regulatory changes effectively. OneSumX Reg Manager integrates AI with compliance expertise, delivering automated, structured data feeds from all relevant U.S. regulatory agencies. The tool offers AI-enabled authoritative source libraries and updates, allowing users to monitor and track regulatory changes and map their applicability while mitigating compliance risks.

Financial institutions have praised the tool's user-friendly functionality, with Tracy Hanlin, CRCM from STAR Financial Bank highlighting the benefits of having all regulations in one platform, leading to greater efficiencies for compliance teams.

?? Funding & Investment Updates

Avenir , a UK-based wealth management solutions provider, has secured €487k (~$518k) in pre-seed funding.

The investment comes in just three months after Avenir’s completion of the ABN AMRO + Techstars Future of Finance Accelerator program. Leading investors joined the round, including SFC Capital , Techstars , and experienced angel investors from financial heavyweights like FNZ Group , J.P. 摩根 and 摩根士丹利 .

Lead investor Edward Stevenson from SFC Capital praised Avenir's innovative approach and dedication to personalization and digitalization in wealth management.

Founded in 2023, Avenir offers a suite of tools to provide personalized wealth management solutions at scale. By leveraging AI and Direct Indexing technology, Avenir empowers advisors to seamlessly integrate clients' values into investment strategies and create customized portfolios and ETFs.

Avenir's CEO and Co-founder Jeremy Bensoussan highlighted that closing the pre-seed funding round so quickly demonstrates the market's demand for personalized digital solutions in wealth management.?

?? Wealthtech Cahoots

CapIntel , a financial technology solutions provider for financial advisors, has renewed its five-year partnership with IG Wealth Management (IG).?

IG Wealth Management is a national leader in delivering personalized financial solutions to Canadians and has $128 billion in assets under advisement as of March 31, 2024. The renewal builds on the existing relationship between the two companies, with over 3,000 IG professionals using CapIntel since 2021 for streamlined compliance practices. Overall, Capintel’s platform helps over 14,000 advisors and 800 wholesalers.

Damon Murchison , President and CEO of IG Wealth Management, explained that CapIntel's platform aligns with their vision by empowering advisors to engage in deeper conversations, simplify compliance, and deliver richer client experiences. Just as CapIntel's Founder and CEO, James Rockwood, CPA, CA , Murchison expressed enthusiasm about continuing the collaboration and Capintel empowering IG's advisors and clients to achieve greater success.

The renewal agreement includes streamlined workflow integrations through Salesforce and optimizing advisor workflows.?

?? Bird’s Eye View

When wealth management firms look to adopt AI solutions, they risk drowning in the vastness of options available. Firms must take a methodical approach to determine whether AI is needed and what kind of AI solution would be the best fit.?

Several WealthTech leaders shared with FinTech Global their tips on selecting AI solutions. Here’s the rundown.

• Evaluate whether AI is necessary or if simpler solutions can address the issue. Fredrik Davéus , CEO and co-founder of financial analytics API developer Kidbrooke , warns that managing the risks associated with AI, such as "hallucinations" and bias, is no easy task.
• AI can be applied to many areas of wealth management, including client onboarding, data analysis, and compliance. Radomir Mastalerz , co-founder and CEO of wealth management platform WealthArc , suggests focusing on specific parts of the business rather than trying to implement AI in multiple areas at once.
• Efficient data management and processing should be a primary focus. AI can extract structured data from unstructured sources, improving data utilization, points Davéus.?
• Data context is key, so Mastalerz advises putting AI in the context of a client, market, etc.
• The chosen solution must also have strong data privacy and security measures in place, says Mastalerz.
• Firms should have a strong procurement team to evaluate AI solutions based on adaptability, cost, and data privacy. Davéus emphasizes the importance of finding a minimal use case to test the AI solution and then expanding from there.
• Remember to ensure that AI solutions integrate smoothly with existing technological infrastructure and data assets and can scale with your firm’s future requirements. That’s the point by Pavan Cherlapelly , head of technology at asset management software developer Aiviq .

The full checklist for choosing an AI solution is available at FinTech Global .

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Sources: Financial Times , Business Wire , Wolters Kluwer , Avenir , and Fintech Global .