Article How will AI impact financial advice?

The impact of Artificial Intelligence (AI) in financial advice isn’t solely a subject for future speculation – its effects are already being felt.  Some advice firms are using the technology to enhance various aspects of their services as they look to achieve better outcomes for their clients.

In a recent speech, Jessica Rusu, Chief Data, Information and Intelligence Officer at the FCA, highlighted AI’s ‘potential to transform the way we manage our finances’. However, she also noted multiple possible risks involved.¹

A pivotal moment is likely to be approaching in how AI progresses within the financial advice industry. Here, you can find out how AI is being used by financial advisers, the opportunities it brings and how it could shape the way you work in the future.

AI – the context today

AI simulates human intelligence in computers by programming them to ‘think’, learn, and improve their ability to perform tasks. It’s driving customer recommendations in eCommerce, and enhancing customer service chatbots.

In a survey with 180 UK financial advisers, 73% anticipate incorporating AI-based applications in their advice process in some way in the future.² The technology is well suited to tasks that require the speedy processing of large volumes of data – and detecting patterns within it.  This has the potential to support you in several ways, which will be covered in the following section.

For further information on leveraging data in financial advice, read 5 ways to optimise data to help you and your clients.

4 uses of AI in the financial advice industry

While the technology and its uses are evolving rapidly, AI can already make an impact in the financial advice sector. Here are some examples of how it could currently be used within your business.

1.  Speed and efficiency

AI can complete tasks in seconds that you might take hours to do. For example, gathering information, comparing products or generating reports. This has the potential to release you from administrative tasks so you can spend more time working with your clients. The ONS found that of businesses currently using or planning to use AI, 35% said they were doing so to create efficiencies.³

2.  Data insights

Because of its ability to observe patterns in vast datasets, AI can find insights that could help you to make informed decisions and support you in shaping your investment forecasts. By combining AI’s number crunching abilities with your own knowledge of the data, economic landscape and client needs, it could help to fine-tune your forecasting. 

3.  Communication

Customer experiences could be improved with AI. It can tailor newsletters, sales pitches and other literature to clients’ needs or to help you win new business. However, while it can help with communication directly, perhaps the biggest impact in this area will be to free up time for you to focus on your own communication.

4.  Fraud detection

AI can see anomalies in data to identify potential cases of fraud, which cost the UK economy £1.2 billion in 2022.⁴ A major credit card issuer, for instance, uses the technology to help banks predict fraudulent transactions before money leaves payers’ accounts.  In the ONS’ research with businesses currently or planning to use AI, 35% said cybersecurity was another reason for doing so.³

What will an AI future look like for financial advisers?

The integration of AI in financial advice is indicating a new era in the industry, but its outcomes might not benefit everyone. As the technology becomes more established, it’s likely to bring new opportunities, but potential risk too.

AI and Consumer Duty

AI could help you achieve good outcomes for your clients in compliance with the Consumer Duty principles. This is because its data processing and potential trend forecasting capabilities might improve your ability to understand and support your clients.

AI could make scams more sophisticated

When it comes to scams and fraud, AI presents a double-edged sword. While it can help you with fraud detection, it’s could also increase the complexity and sophistication of fraud and scams. For instance, AI can generate human voices, videos and images that could put your clients at risk.

You may face questions about how well your AI systems deal with scams – especially those it hasn’t been trained to detect.

A human touch will remain key

AI lacks one crucial ingredient – humanity. AI is unlikely to be sensitive to a client’s wellbeing and discuss matters with them sympathetically, especially in a way that clients trust. It can’t pick up on nuances such as body language and tone of voice that require real life interaction. According to Salesforce, 37% of consumers trust AI’s output to be as accurate as a human’s. But 81% want a human to be involved in their interaction with an organisation, to validate what the AI produces.⁵   Your strong client relationships and wealth of experience will remain hugely important factors in the overall advice offering for clients.

A collaborative approach could lead to an exciting future

AI presents you with opportunities to offer greater value to your clients. It can streamline operations, help you comply with Consumer Duty principles – and be a powerful research tool. However, it’s still a tool that organisations, customers and advisers must experiment with to find its most effective application. Caution is required, as the technology is still in its infancy. Like any transition, the move to AI is best achieved with careful consideration and planning.

The progress of AI doesn’t need to be concerning. Embracing a collaborative approach could benefit your business and your clients. Despite its potential, AI can never fully replace the years of expertise, relationship building and human touch that advisers bring to the table. While it might be beneficial in supporting your financial planning, your unique approach, knowledge and soft skills is something it can’t replicate. By combining your own strengths with AI’s capabilities, you could enjoy the best of both worlds and more effectively support the needs of your clients.