The rise of Artificial Intelligence (AI) in the financial sector always leads to a division in opinion about the technology. There is either a love and adoption of AI or a scepticism and rejection of AI. It is as divisive in the UK as Marmite.
According to a recent data from Opinium, only 6% of IFAs are currently using AI tools in their services to clients. Views on the use of AI among IFAs more generally was mixed, with 32% believing AI was a risk to their business, while 49% of respondents thought AI presented an opportunity for their business.
The research highlights the split opinion – but unfortunately for those dismissive of AI – it is set to become a big part of the industry.
Recently, UK Prime Minister Keir Starmer launched the Plan for Change campaign which emphasised AI as the key force to help turbocharge growth. This was several weeks before UK financial regulator Financial Conduct Authority (FCA) introduced its AI Lab to support innovators in developing new AI models and solutions.
The UK watchdog said it was a chance for the whole industry to work together in shaping the future of AI in financial services.
Is AI that scary for advisers?
Some financial advisers may not like the situation – but they will need to become more open to the use of AI. A new, or different way of doing things will also come with a hint of trepidation, as is human nature.
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However, AI can be used and designed to complement the adviser-client relationship.
The implementation of AI in the financial advice industry must be done in a controlled manner and will need to fully integrate with systems and processes to realise the full benefit that the technology can bring.
In fact, it can handle repetitive tasks such as data analysis, risk assessment, and portfolio management, which will give advisers more time to focus on what matters most: building personal relationships and providing tailored advice the client wants and is paying for.
What areas of AI should advisers be thinking about?
AI is already being used by some companies in the financial advice industry – and many tools are already helping businesses become more efficient.
According to the Opinium survey, 27% of IFAs thought AI would have a positive impact on their business. But not everyone believes this will be the case, as 23% thought AI would have a negative impact on the advice industry as a whole.
While some of the larger IFA networks have embraced tech and digital tools, many of the small/medium firms are lagging, not least because it can be expensive, complex and distracting. In a world where clients demand more flexibility and automation, failing to adopt new technologies can put advisers and firms at a disadvantage. Technology offers solutions that can streamline operations, improve efficiency, and make services more accessible to a wider audience.
Advisers should consider AI tools that can enhance various aspects of their business, including:
- AI Voice Assistant: AI can ‘attend’ and transcribe meetings with clients. This will track the meeting allowing the adviser to focus on the conversation and building relationships.
- Robo-Advisers: Automated portfolio management and rebalancing tools can help streamline investment strategies, freeing up advisers to focus on more complex cases.
- Risk Management: AI can help identify potential risks in a portfolio or detect signs of fraud, ensuring better protection for both clients and advisers.
One key aspect of the use of AI could be as a means to break the barriers of clients who may not be financially attractive to IFAs now. AI tools can be a way to build relationships with younger clients building up their assets and investments in early life.
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Young clients have grown up with digital solutions for most things in their life. If advisers continue to neglect tech-driven solutions, they risk missing out on this demographic, widening the advice gap. Embracing AI could be the key to attracting and engaging younger clients, ensuring that advisers remain relevant and competitive in an increasingly tech-driven world.
Ahead of the game
Historically, the financial services industry, as well as the financial advice sector, have been slow to adopt and deploy new technologies.
However, with the data that is available to firms in the industry, and the very clear signs from regulators that they want this technology to be used, the time to embrace AI is now.
Advice firms successfully implementing AI into their business processes can get ahead of competitors and other industries to really demonstrate how beneficial the new technology can be to both clients and also their business.
Richard Shearwood is a Wealth Consultant at Simplify Consulting
