International regulatory coordination, boosting the UK fintech ecosystem and investing in skills and talent, form some of the key recommendations from the final report from the Technology Working Group on future AI use in the investment management industry.
The industry-led Technology Working Group was established to identify how the UK investment management industry could harness the potential of innovative new technologies.
‘Artificial Intelligence: Current and Future Usage Within Investment Management’ outlines current common use cases and examines enablers and barriers for longer-term AI adoption, as well as recommendations for future AI integration in the investment management industry. For the industry as a whole, AI represents a strategic opportunity to increase both the domestic and international competitiveness of the UK’s investment sector and contribute to economic growth.
The report follows two previous phases of work which focused on the application of distributed ledger technology (DLT) to UK fund infrastructure through tokenisation. DLT and AI present significant opportunities for the investment management industry and modern-day investor, most powerfully when they are paired together. The work of the Group offers a picture of how the UK funds industry can work with government and regulators to best harness and adapt to the potential of emerging technologies.
The report’s key recommendations for policymakers and industry which if implemented, would boost the growth of the UK economy and the industry, include:
- Establishing regulatory clarity and consistency to enable developers and users of AI to plan and invest with confidence. The Group has recommended closer coordination between regulators and the further development of AI standards and is supportive on the current direction of UK government travel.
- Building a UK fintech ecosystem with strong international connections that investment management firms can leverage to gain access to innovative solutions, specialised knowledge, and valuable insights.
- Joint public and private sector action on AI-enabled fraud, to combat malicious actors and fight cybercrime and misinformation. This will be fundamental to building public trust in AI and supporting innovation efforts by well-intentioned organisations.
- Managing systemic risk through collective understanding and identifying best practice in risk management. The changing profile of systemic risk in the financial sector should not be a reason to hold back from innovating.
Chris Cummings, CEO of the Investment Association, commented: “It’s been a privilege for the IA to be involved in the Technology Working Group. The collaborative effort with policymakers, regulators and market participants has demonstrated strong appetite to galvanise industry progress.
There is potential to embed AI in nearly every function of investment management, to enable better products, services and business growth. In turn, this could help millions of domestic investors and the UK economy. Many firms are already exploring the innovative opportunities of AI to bring about better outcomes for clients and consumers, and the recommendations in this report offer a blueprint to move beyond early use cases to more significant integration and transformation.”
Michelle Scrimgeour, CEO, Legal & General Investment Management and Chair of the Technology Working Group, commented: “Chairing the Technology Working Group has been an honour and a vital opportunity to explore emerging technologies which will define the future of the asset management industry. We began the journey several years ago with the implementation of analytical AI, which has been foundational in algorithmic trading and anti-money laundering monitoring. However, the use of AI is evolving at great pace and the advent of generative AI is a capability that marks a real paradigm shift for our industry.
“When paired with the promise shown with tokenisation, the new technological innovations outlined in this report have the potential to redefine how we think about asset management over the next decade.”
Tulip Siddiq MP, Economic Secretary to the Treasury, said: “I am thrilled to welcome today’s report from the Technology Working Group. It provides UK asset managers with a blueprint for harnessing the power of AI and capturing the enormous opportunities it creates. On the eve of the International Investment Summit, this report once again demonstrates UK financial services at its cutting-edge best.”
Sarah Pritchard, Executive Director of Markets and International at the FCA, said: “The FCA is committed to fostering an environment that encourages technological progress and innovation while ensuring the safety and integrity of our financial markets.
“We welcome today’s report as an important milestone. I look forward to continuing our collaboration with industry, government and policy makers as this work progresses.”
