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Embracing AI can help enhance financial advice industry

by Uma
iStock 1154923171 7

Embracing AI can help enhance financial advice industry

 

By Nigel Green, deVere Group CEO and founder

Since its launch at the end of November 2022, the Artificial Intelligent chatbot ChatGPT has taken the world by storm, catapulting awareness of the potential of AI mainstream.

ChatGPT currently has 1.16 billion users. It crossed 1 billion users in March, representing an increase of almost 55% from February to March. This makes it the fastest adopted technology in history, according to experts.

All the tech titans are fully aware of the enormous returns that could be secured when AI starts to radically change the way businesses work and how consumers interact and live their lives.

Whether people like it or not, AI is going to fundamentally change every sector, including financial advice.  

There are concerns about how this revolutionary technology might ‘crater-out’ our industry as ‘machines could take over.’

There are also legitimate questions to be asked regarding data privacy and security. There’s a risk of data breaches or unauthorised access to personal client information, leading to privacy violations and/or identity theft. As such, safeguarding data and implementing robust security measures is critical in mitigating these risks.

Another well-documented issue is that AI algorithms are trained on historical data, which could contain biases and reflect existing societal inequalities. 

The use of AI in financial advice may also present regulatory and legal issues. Compliance with existing regulations, such as data protection and consumer privacy laws, becomes crucial. 

I also foresee a need for new regulations and standards to address the specific risks and ethical considerations associated with AI in financial advice.

Another conversation that needs to be had is regarding the speed of AI algorithms. While the rapidity of the processing can be advantageous, it could potentially trigger systemic risks. Rapid and automated responses by AI systems to market events could ramp-up market volatility and contribute to ‘flash crashes’ or other unexpected outcomes. Therefore, appropriate risk management and monitoring mechanisms must be implemented to avoid these issues.

However, despite the potential risks mentioned, which must be addressed, I’m confident that financial advisors who embrace AI now and in the future will find it enormously beneficial.

This ground-breaking tech can automate time-consuming and repetitive jobs, including data entry, report generation, and simple investment analysis. 

By delegating these tasks to AI, financial advisors can put emphasis on providing personalised advice and nurturing stronger client relationships.

The algorithms used can also process huge amounts of financial data and generate key insights more quickly. This means that as advisors we’ll be able to make more informed and accurate investment decisions based on real-time market trends, economic indicators, and client-specific data. But, as I have previously said, the risks must be checked by an advisor.

For me, the most appealing aspect of AI is that it can help us with personalisation and customisation.

By leveraging client data, the algorithms can assess individual preferences, risk tolerance, and financial goals to offer bespoke investment strategies and financial plans, which could help lead to better outcomes and experiences.

I’m of the view that AI should be regarded by those within our industry as a tool to augment our services capabilities, and not as a replacement for our real-world expertise. 

While AI can assist with data analysis and decision-making, it can’t replace the human touch and the ability to understand the personal needs, circumstances and emotions of our clients. 

Financial advisors can leverage AI to enhance their knowledge, efficiency, and service.

Embracing AI allows us to adapt and evolve our skillset and knowledge to new technologies, stay relevant in a rapidly changing industry, and explore innovative new business models. 

In short, I believe that financial advisors who become tech-savvy, future-focused professionals who can harness AI could, ultimately, deliver better outcomes for their clients. Yet, clients will always, sensibly, want interaction with a human before making financial decisions.

 

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