AI and advice: The beginning of a beautiful friendship?

It is no secret that in financial advice, some of the benefits of using AI include reducing the time it takes to complete administrative tasks, recording meetings for more detailed information, the potential to reduce costs over time, analysis of trends, and personalisation in financial plans.

Advisers still ‘at the start of the AI journey’

Fintech company FIS head of wealth and asset management EMEA Russell Andrews says the industry is “only at the start of the AI journey”.

Lamb Financial managing director David Lamb says his firm is beginning to use AI by using Fireflies to record meetings.

“This is good for our protection and clients because we provide clients with a lot of information, the majority of which they are unlikely to absorb,” he says. “We are hopeful that they are grateful that we can give them a summary of the meeting so they can go back over it in their own time.”

“As a firm, we are in the process of reviewing various AI empowered tools to try to understand how they could further enhance our processes and propositions,” he said.

“Where we are looking to implement AI is to improve efficiencies with our research and administrative tasks. The goal is to allow us to spend more time serving clients.”

Regent-Bascombe says advisers should be using AI to increase efficiencies in administrative tasks. “Some interesting use cases of AI tools are involved in the recording of meetings, automated workflows, and screening of data,” he tells PA.

“The recording of meetings helps to ensure advisers do not miss any details and can spend more time focusing on their clients. Automated workflows help to increase administrative efficiencies and screening data helps to identify clients with similar interest/hobbies or even just record how they take their tea.”

Rosemount Financial Solutions adviser Zachary Bawa believes there are “lots of opportunities where AI can add value to the financial services industry”.

“A great example that we employ is in the drafting of client facing material, from educational pamphlets to suitability letters, AI is good at explaining complex topics in simple terms,” he says.

“Another use for AI is in the checking of cases pre- or post-sale, by this I mean cross referencing documentation such as a client agreement, suitability letter, and privacy notice to ensure that basic information such as names and addresses are consistent across all documents, it is also possible to present data in the form of example advice cases to pre-train or fine-tune a foundational model.”

Model Office founder Chris Davies says the firm recently launched the generative AI compliance chatbot that can provide signposting, resources, and an audit reporting technology platform. “What we want to do is answer the question, or the problem that advisers have got,” he says.

“What we’re all about is really holding the hand of the adviser digitally to showcase that they’ve got a third line of defence on the governance, risk, and compliance and prove that they are operating a compliant business.”

Navigating risks

AI undoubtedly presents risks such as data and security concerns, with other downsides including decreased human interaction, costs, and having to train the technology to understand tax laws. Innovation in the industry and new ways of operating have the potential to be dismissed, cause some concerns, and see initial resistance.

Evidently, some advisers view the development of AI technology applications as a threat. Last year, Schroders head of UK intermediary solutions [who has since moved to Benchmark] Gillian Hepburn urged advisers to be “more open-minded” to incorporating AI. Her comments came after the investment manager’s UK Financial Adviser Pulse Survey 2023 found that more than a quarter (27%) of advisers will “never” incorporate AI in their advice process.

Regent-Bascombe says AI should be used to assist advisers with what is “under the hood”, rather than clients interacting directly with AI. “It is important to our clients that they continue to have a human interaction,” he says.

Bawa tells PA that the challenge for advisers is having to train the AI model on real-world examples to reach a point where it is making recommendations in line with what an experienced planner does.

“Data is the most valuable resource, and it is both expensive and time-consuming to collate, transform and train an AI model even with access to copious amounts of data,” Bawa says.

“Financial recommendations are highly variable, so while an AI may be used to draft an initial plan, it is difficult to use AI to provide advice from start to finish, at least when the case is more complicated. It is crucial to recognise that advisers do not just provide recommendations, they add value to clients in many other ways.”

One notable risk that comes with using AI is the breach of security. Some clients who are unfamiliar with AI may have potential resistance to its implementation, which creates a challenge for advisers who are reviewing AI tools.

Andrews believes that digital trust is becoming one of the highest priorities for clients, especially as more data is being collected and utilised.

“Regulators are placing significant focus on ensuring that data security is at the highest level possible to provide both protection for clients and incentives to engage, save and invest more for the future,” he says.

“The key for advisers is to outsource core infrastructure to organisations with these high-grade data security protocols embedded in what they do. This is no longer optional and storing data locally or within solutions that have the minimal levels of safeguards, carries too much risk.”

Davies says Model Office’s technology has to be GDPR secure. “Our third-party practice management technology platforms must sign General Data Protection Regulation (GDPR) compliant contracts. We are representing that data in a user-friendly format to showcase compliance,” he tells PA.

Furthermore, Andrews warns that an increased use of AI could drive away clients as financial advice “is and will always be fundamentally based on human-to-human relationships”.

“Humans can only do so much – unlike AI, which has the potential to offer unlimited computing power. The balance is struck when AI is facilitating the adviser to be the best version of themselves, who can first and foremost act as the client advocate, while applying a fiduciary service, delivering tangible value, without compromise to the process, the cost, or the relationship,” he explains.

Davies adds advisers can expect to face the challenge of dealing with “technophobes”.

“We deal with them daily, but you’ve got to convince them. When people are worried about AI, it is because they think it is a challenge or a risk, but they’ve got to look at it and think, well, humans have always adapted. AI is a great opportunity to make our jobs easier, but it’s not going to take away from the people-based skills that humans have,” he says.

“AI is not going to take away from the face-to-face planning and the coaching that these clients need.”

Where is AI heading in the realm of financial advice?

Although AI is transforming the way advisers deal with their clients by enabling more personalised, efficient, and effective services, it is evident that advisers have not fully embraced the technology.

Davies explains that the industry has come a long way already. “Clients will expect that firms need to get tech savvy and offer them tech, irrespective of how old they are,” he says.

Andrews believes AI has “huge potential to enhance the financial advisory process by augmenting the human element with AI tools that can drive even greater levels of personalisation, remove unintended bias, deliver intelligent automation, and enable advisers and planners to execute better advice at scale”.

“As the technology becomes more democratised and more readily understood, we expect this to translate into tangible changes quickly,” he tells PA.

Fintech solution Origo’s chief executive Anthony Rafferty says AI is set to “deliver potentially huge efficiencies and cost savings for financial advice firms”.

However, he warns that the benefits will not be fully achieved if the fundamental processes feeding into the tech are not keeping pace with the market.

Meanwhile, Regent-Bascombe argues that AI is still very new in financial advice, and it is still unclear how much money tools will cost and whether they will ultimately lead to cost savings.

Despite the benefits, many firms are still at the early phases of incorporating AI into their practices.

While some are leveraging AI-powered tools for tasks such as recording meetings and drafting client-facing materials, there remains a prevailing sentiment that the technology has yet to be fully incorporated and perhaps leveraged.

Source: Professional Advisor