Some headlines make it sound like advisers are about to be swept away in a sea of artificial intelligence (AI), but most consumers still want a face-to-face experience for financial planning.
Instead of getting caught up in the hype, we should be looking at how AI can help make that experience better and more efficient, writes Derek Smith.
Consumer studies support the view that many people welcome getting financial advice from a human expert at important moments in their lives. In the midst of the pandemic, a survey from Openwork pointed out that 63% of adults value face-to-face financial support at key times.
And this year, the Lang Cat’s consumer research found that 15 million people in the UK need timely support to protect their financial position and prevent problems before they arise.
Whether enough people who wish to are enabled to obtain advice is a big issue for the entire sector to address. But what preoccupies me and my colleagues at Morningstar is what we can do with technology to empower adviser firms to operate more productively, directly benefitting their clients via a smoother financial planning journey.
Examining AI outside the hype bubble
Although the technology I’m talking about is still at an emergent stage – let’s ignore the general hype that AI is taking over the world – we can already see the opportunity for ‘AI assistants’ to give adviser firms a real superpower: the ability to boost and accelerate their productivity, engagement, financial analysis, service and compliance.
Let’s look at the areas where AI could be deployed to enhance how adviser firms operate at key stages of the advice process.
Discovery and onboarding
Generative AI can be used to analyse Open Finance data (bank accounts, credit cards and investments) and generate real-time personalised insight prompts and recommendations for the adviser to discuss with the client, covering their financial history, spending patterns and investment portfolio.
Fact-finding
AI can help advisers collect and analyse client data more efficiently, improving the accuracy and speed of the fact-finding process, allowing for a more comprehensive understanding of the client’s financial position. AI can also help advisers identify patterns and insights that may not be easily recognisable using traditional methods, such as predicting life events or detecting stress in the client. It can then deliver real time prompts or recommendations to support the delivery of richer in the moment advice and guidance to the client.
Planning
AI-powered financial planning tools can assist advisers to create personalised financial plans for their clients that align with their goals and objectives. AI can be of great help in running simulations and stress tests to determine the likelihood of the client achieving their goals under different market conditions.
Implementation
AI can automate routine admin tasks, such as opening accounts and processing paperwork, reducing the time and effort required to implement the financial plan. AI can also help advisers make more informed investment decisions by supplying real-time market data and trend analysis.
Monitoring
AI-powered portfolio management systems can help advisers monitor clients’ investments and rebalance portfolios as necessary. AI can also provide clients with personalised alerts and recommendations based on market fluctuations and other factors that may impact their financial plan.
Ongoing reviews
AI can help advisers identify potential areas of improvement and give clients insights into their financial performance and progress towards their goals. AI can also assist with compliance and regulatory reporting, ensuring that advisers are meeting their obligations and keeping clients informed.
As we’ve seen with our own machine learning, AI can indicate when a client is likely to leave their adviser or may be in a vulnerable state, and continually self-learn to improve the insights. This gives advisers the opportunity to have what could be an important conversation with their client earlier.
Using AI to assist, not take over
Humans helping humans will never become obsolete wherever people need to trust a service before they’ll be content to pay for it. Lack of trust is certainly one of the barriers to seeking advice, as consumer research has reported.
The onus is on platforms, product providers and adviser tool providers to make sure their deployment of AI complements the objective of advice firms to deliver their service in ways that work best for humans. This is an imperative in firms’ endeavour to achieve good outcomes for their clients, and of course this is non-negotiable under Consumer Duty.
For our part, we’ll continually research, innovate and evolve how we can support adviser firms to grow and prosper with the assistance of AI.
By Derek Smith, head of technology – International Wealth at Morningstar Wealth
