When intelliflo recently asked advice firms for their views on artificial intelligence (AI) and how it might impact their business, 72% thought integrating it in advice delivery was important, while just 7% expected it to negatively affect the profession.
Nearly half (46%) are already using, or plan to use, AI in some form. However, a resounding 95% feel they don’t have the required skillset within their firm to fully harness the power of AI.
While most firms see the potential offered by using AI within financial advice, many worry about implementing it effectively and safely, especially within our highly regulated sector. Yet with technology moving rapidly, firms not embracing the benefits of AI risk being left behind.
How can firms seize the opportunities offered by AI, without falling foul of the possible risks?
Understanding the terminology
First of all, what do we mean by AI? Put simply, AI is the ability of a computerised system to perform mental processing normally associated with intelligent beings.
Machine learning is a term often used alongside AI, or sometimes interchangeably. This is a subset of AI where computers use mathematical models to learn without direct instruction, allowing continuous improvement over time as more data is added to the model, which is important within a regulated industry.
AI is the ability of a computerised system to perform mental processing normally associated with intelligent beings
Generative AI has become popular through tools like ChatGPT, which learn patterns from large datasets that allow them to create text, images and videos based on user prompts.
While forms of AI have been available for some time, advances in natural language processing (NLP) now let tools process and respond to normal written and spoken language without requiring computer code, making AI more accessible.
Pragmatic use of AI
AI creates a significant opportunity for firms to reduce human admin and free up their teams to focus on higher-value work.
Some advice firms are already using AI tools to transcribe meetings, extract details from documents, populate fact-finds and reports, and flag missing information. Advisers can then review and refine this before it’s automatically stored alongside other key documents.
AI can also improve data analysis and personalisation, improving the overall adviser-client journey. For instance, by analysing large datasets, AI can detect common factors between clients, helping with segmentation. Drawing in data from multiple providers can accelerate and enrich fact-finding.
With a clearer view of a client’s financial position, advisers are able to deliver a more personalised recommendation and plan aligned with the client’s goals, risk profile and capacity for loss.
AI supports the Consumer Duty too, by educating and informing clients. Chatbots can answer questions or explain financial concepts, escalating complex queries to advisers. AI-generated voices or tailored videos can make complex information more accessible, particularly for vulnerable clients.
AI-generated voices or tailored videos can make complex information more accessible, particularly for vulnerable clients
The key takeaway? AI is there to assist, not replace, advisers. By automating admin and repetitive tasks, it gives advisers more time to focus on client conversations and relationships.
According to Royal London’s 2024 Meaning of Value report, clients rank their adviser’s skills and knowledge first when it comes to the most valued aspects of advice. Other intangible aspects, like trust in the decisions, reputation, communicating financial concepts and delivering peace of mind, all factor in the top ten.
Regulatory and data protection implications
AI innovation is moving faster than regulatory action to impose guardrails. Last year, the FCA published an AI Update, acknowledging that “AI can make a significant contribution to economic growth, capital market efficiencies, improve consumer outcomes as well as good regulation”.
However, it added, “this requires a strong regulatory framework that adapts, evolves and responds to the new challenges and risks that technology brings”.
In the meantime, advice firms must use caution when it comes to adopting AI. Some tools store user data to train their models, making them unsuitable for use with client information, while others may rely on datasets containing inaccuracies.
Before using any new software, it’s crucial to do your due diligence to make sure it meets your needs, integrates with the rest of your technology stack and keeps your clients’ and firm’s data secure.
Automating parts of your work can free up time, but how you use that will be vital for client satisfaction
AI is set to transform how firms operate. Automating parts of your work can free up time, but how you use that will be vital for client satisfaction.
As Dave Coplin, founder of the Envisioners and former chief envisioning Officer of Microsoft UK, said at our conference in June: “You can expand your customer base, you can get more clients and just crank them through the sausage machine.
“But increasingly, your customers are going to be coming to you having already asked ChatGPT for a financial plan, so you’ve got to look at how the technology can make you better at what you do.”
AI offers the advice profession a chance to become not just more efficient, but more effective too.
Nick Eatock is CEO of intelliflo
