Embracing AI in financial advice

Nick Eatock, CEO of intelliflo

When intelliflo asked advice firms for their views on Artificial Intelligence and how it might impact their business recently, 72% thought integrating it in advice delivery was important, while just 7% expected it to negatively affect the advice 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 so quickly, firms that do not embrace 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 Artificial Intelligence? It’s become something of a catch-all term for the use of technology to speed up human processes, but put simply, AI is the ability of a computerised system to perform mental processing normally associated with intelligent beings.

You may have also heard the term machine learning used alongside, or sometimes interchangeably, with AI. This is a subset of AI where computers use mathematical models to learn without direct instruction. It allows for continuous improvement over time as more data is added to the model, which is important within a regulated industry.

Generative AI has become popular through tools like ChatGPT, which learn patterns from large datasets that allow them to create text, images and videos in response to specific prompts entered by a person. While forms of AI have been available for some time, the difference now is how natural language processing (NLP) allows today’s tools to process and respond to normal written and spoken language. There’s no need for users to input computer code to extract information, making AI far more accessible.

Pragmatic use of AI

Put together, this functionality creates a significant opportunity for firms across all sectors to reduce human admin and refocus their people on work that adds greater value.

For instance, some advice firms are already using AI tools to transcribe client meetings, pull out information from client documents and meeting notes, and automatically populate fact-finds and initial reports and highlight missing data fields. Advisers can then review and add further detail as applicable before the approved information is automatically stored in the client record along with the original transcript and other key documents.

Using AI also offers the potential to deliver better data analysis, clearer insight and greater personalisation, improving the overall adviser-client journey. For instance, being able to quickly interrogate vast volumes of data, AI can detect common factors between clients, helping with segmentation. Drawing in data from multiple providers can accelerate and enrich fact-finding. By easily obtaining a deeper view of a client’s financial position, the adviser can create a truly personalised recommendation and plan that aligns more closely with the client’s goals, risk profile and capacity for loss.

Given the importance Consumer Duty places on customer understanding, AI is useful for helping to educate and inform clients. Drawing from an approved database, a chatbot can answer basic client questions or explain key financial concepts, passing them to their adviser for a more personalised or detailed response if appropriate. An AI-generated voice can usefully deliver information in an accessible way for vulnerable clients. Videos tailored via AI can educate clients based on their unique financial objectives, preferences and life stage.

The crucial point to make here is that AI should be seen as a hardworking assistant, rather than a replacement, for advice professionals. By automating some of the admin work within the financial advice journey and handling some of the boring, repetitive tasks, AI can give your people more time to spend on client conversations and building 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

Inevitably, AI-based innovation is moving much 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”, but that “this requires a strong regulatory framework that adapts, evolves and responds to the new challenges and risks that technology brings”.

While regulation catches up, advice firms need to exercise common sense when it comes to incorporating AI into their business. Some AI tools store the data entered by users and use it to further train their model making them unsuitable for use with client data. Others may draw on a dataset that includes inaccurate information. 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.

AI is certainly going to change the way firms operate. If a percentage of your work can be automated, how you use that extra time is vital to ongoing client satisfaction.

As Dave Coplin, founder of the Envisioners and former Chief Envisioning Officer of Microsoft UK, summed up 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 Chat GPT for a financial plan, so you’ve got to look at how the technology can make you better at what you do.”

I think AI provides the advice profession with an opportunity to be more effective, as well as more efficient.

This article was first published in Money Marketing on 31 January. Please find a link to the original piece here.