Wealth management firms plan to ramp up their spending on artificial intelligence, while also hiring more financial advisors and other client-facing staff.

Those are among the key findings from research firm Cerulli Associates, which surveyed large registered investment advisory firms about their technology and hiring strategies in the next two years. Average AI-specific spending is projected to rise this year to $494,000 per firm from $237,000 in 2025, according to Cerulli, which conducted its study with Vista Equity Partners. Overall average technology spending is projected to grow to $3.3 million per firm from $2.9 million, Cerulli said. Firms surveyed had an average of $18 billion in assets under management.

At the same time, wealth managers aren't cutting back on hiring. A majority of RIAs surveyed by Cerulli, 73%, say they expect to add junior advisors over the next two years. Sixty-seven percent of RIAs anticipate hiring more client service associates over the same time frame. And 56% of RIAs project they will hire more senior advisors.

"There is a lot of discussion around whether AI will replace the advisor, but our research shows that advisors are using AI to enhance their capacity and their approach [to serving clients]," Asher Cheses, senior director of wealth management at Cerulli, tells Barron's Advisor.

Of RIAs that are already using AI, 64% say it has cut down on manual administrative work, according to Cerulli. And 46% say it has improved the quality of client communications. Cheses adds that RIAs were using AI for tasks such as meeting preparation and drafting follow-up emails to clients.

Cheses says that Cerulli found that the firms getting the most bang for their buck from AI weren't necessarily the largest firms by assets under management or the firms with the largest technology budget. Instead, the best predictor was a firm's governance structure, meaning a clear decision-making process and an identifiable employee responsible for speeding AI adoption within their firms, Cheses says.

Cerulli surveyed 68 RIAs between May and July; the firms represented approximately $1.2 trillion in aggregate AUM. As part of the benchmarking study, Cerulli also interviewed executives, technology leaders, and senior advisors.

Cerulli's latest report is a sign that, at least for the moment, wealth management firms don't expect AI to replace human advisors. Of course, it is a nascent technology and much can change over the next few years. "I wouldn't say AI would never replace a role within a wealth management firm, but we did a two-year outlook and it really does point to augmentation rather than replacement," Cheses says.