Active-versus-passive investing has long been one of the industry’s defining debates, as investors have questioned whether discretionary strategies can consistently outperform benchmarks after fees. Yet the industry is now asking the wrong question.
The real question is not whether active or passive investing will prevail. It is whether AI will fundamentally reshape both.
Major institutions are already deploying AI across investment and wealth management. Morgan Stanley has introduced AI tools across its advisory platform. UBS has described AI as transformative across the wealth management value chain. J.P. Morgan has reported productivity gains through AI-enabled workflows.
We have already seen the first stage of this disruption. Robo-advisory platforms such as Betterment and Wealthfront have shown that risk profiling, portfolio allocation, rebalancing and reporting can be automated and delivered at lower cost. However, these platforms have remained largely rules-based, focusing on assessing clients’ risk profiles, allocating assets to model portfolios, periodically rebalancing and keeping costs low.
Agentic AI is potentially different because it moves beyond simple rules-based automation. It can analyse research, market data, earnings calls and macroeconomic signals; identify risks; propose portfolio changes; and support controlled decision-making workflows.
In that sense, it represents a third model beyond traditional active investing, which relies on human judgement and passive investing, which relies on index replication.
Portfolios can be continuously analysed, adjusted, managed for risk and optimised through systematic rules, machine learning and automated decision-making, without either human discretion or index construction being the primary driver.
For both institutional asset management and private banking, this could be a game-changer. The winners will be those that use AI to reshape how investment value is created and explained. The losers will be those that fail to adapt. They will be overtaken by a model that is faster, cheaper and increasingly intelligent.
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