In previous years, leaders of some of the largest wealth firms like Citigroup, Goldman Sachs and Morgan Stanley were talking about AI during quarterly conference calls as a new, but mostly untapped frontier.
Now, the biggest players have entered the AI landscape as more come in. And the discussion with investors is getting deeper into exactly how these leaders are deploying AI or advanced technologies — whether it be internally to streamline workflows, client facing, or both.
The cost to build, employ and test these advanced technologies is also beginning to creep into expense sheets more, though it is often hidden within operating and technology expense line items.
Here's an overview of how some of the largest firms are implementing AI and other fintech tools.
Goldman Sachs
One of the most vocal executives to talk about technology and AI during first-quarter earnings was Goldman Sachs CEO David Solomon, who started the investor call on April 15 saying that AI was "a topic coming up in virtually every client conversation I have."
The New York investment bank is already looking at how to deploy AI to help streamline employee productivity as well as ways to interact with clients.
"Today, we are proud to be at the forefront of advising clients on these topics and how to think about potential use cases in their operations," he said. "As we look longer term, to the extent that this technology develops in line with expectation, there will be significant demand for AI-related infrastructure, and as a result, financing, which will be a tailwind to our business."
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Operating expenses in the first quarter grew 2% to $8.7 billion compared to the prior quarter.
Solomon said internally, Goldman Sachs has a team of engineers applying various machine learning and AI applications specifically meant to enhance productivity and create more operating efficiencies, but safely.
"Like with any emerging technology, a thoughtful approach and keen eye on risk management will be crucial," he said.
Morgan Stanley
Morgan Stanley has been building out a number of more advanced, customizable investment platforms, like Parametric Portfolio Associates, which it acquired in 2021.
"We've been giving technological tools to our advisors and investing in the business," said Morgan Stanley's Chief Financial Officer Sharon Yeshaya, with regard to Parametric. "So, it's a push/pull and it's making sure . . . that we're thinking about our resources efficiently and durably as we move forward through the cycle."
The firm overall reported record profits in the first quarter and got closer to a goal of having a 30% pretax margin in its wealth unit. That figure came in at 26.3% in the first quarter.
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"What we're trying to do is make sure that we also have the right trade-offs between investing in the business, giving ourselves room for technology and being able to build a 30% margin for a sustainable business and durable revenues over time," Yeshaya said.
Citigroup
Citigroup reported an 11% jump in expenses partly from technology investments that were focused on risk and controls, and upgrading its platform including within its wealth unit, which had lower revenues in the first quarter.
The megabank is coming out of a multiyear reorganization and 6% drop in net income in its wealth unit due to lower revenues and higher expenses.
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The wealth team "is focused on three areas: first, rationalizing the expense base; second, turning on the growth engine by focusing on investment revenues; and third, enhancing our platforms and capabilities to elevate the client experience," said Citi CEO Jane Fraser on the earnings call. "Now these won't happen overnight, but getting these things right will help us get more than our fair share of the $5 trillion of assets that our clients have away from us, and that will help us get our returns to where they need to be in this business in the medium term."
