Trick or treat? Dispelling the myths about AI in advice

Nick Eatock, CEO, intelliflo

In a heavily regulated sector like ours, where trust and accuracy are essential, it’s easy to get caught up in the scary stories surrounding artificial intelligence. Although the current speed of change can feel unsettling, AI is emerging as a valuable tool for the advice profession rather than a lurking shadow.

As Halloween approaches, we explore three common concerns we hear about AI implementation and suggest how your firm can harness the technology’s potential without being spooked by the misconceptions.

Curse or catalyst?

Given the growing admin and resource pressures on advice firms, AI offers a clear opportunity to improve efficiency and reduce operating costs while supporting good outcomes for clients. But with a 2023 Goldman Sachs report estimating that 300 million full-time jobs could be automated over the next decade, it’s not surprising that some still feel haunted by the potential risks of AI adoption.

Yet while the report points to meaningful change in the workplace in the coming years, it highlights the potential for job creation too, noting that 60% of workers today are employed in roles that didn’t exist 80 years ago. In addition, it emphasises that most occupations will only be partially affected, with AI likely to complement, rather than replace, human skills in many cases.

This seems particularly true in the advice profession. Recent research by Unbiased finds that while a third (34%) of consumers are open to their adviser using AI tools, seven in ten still want to receive financial advice from a human. Respondents say trust and personal connection are most important when making complex financial decisions.

Our own market wide advice efficiency survey echoes this. Advisers are turning to AI to enhance, not replace, the human in the process. Over two-fifths (43%) of respondents told us they are already using AI to boost automation and personalisation, data analysis and compliance, while 64% want to see AI support report writing, meeting transcription, fact finding and system integration. If AI can cut through some of the red tape and free up advice professionals to spend more time developing deeper client relationships, that would be a genuine treat for everyone.

AI and the re-ghoul-ator

Staying on the right side of the regulations is always a priority for advice firms and AI introduces additional concerns around data protection, confidentiality and accountability. The horror stories of sensitive client information being fed into ChatGPT are enough to chill any compliance officer’s blood. And there’s also the question of accuracy: who takes responsibility if AI outputs are wrong, biased or misleading?

In September, the FCA published its approach to AI, saying, “We do not plan to introduce extra regulations for AI. Instead, we’ll rely on existing frameworks, which mitigate many of the risks associated with AI.” While that means no new AI-specific guidance – at least for now –Consumer Duty is clear that advice firms remain responsible for ensuring any products and services they use, including AI, deliver fair value and avoid foreseeable harm.

To manage the risk, focusing on AI tools designed specifically for advice firms, rather than generic large language models, is key. Conducting thorough due diligence on providers is also crucial, asking questions including how they will manage and share your data, who owns the rights to it and how the solution will be kept up to date as regulations or technology evolve.

Franken-tech’s monster

Fragmented technology is already a nightmare for many firms. Advice professionals spend too much time switching between systems and rekeying information, impacting the client experience and increasing the risk of errors. This is reflected in our advice efficiency survey, with 96% of respondents believing their advice journeys could be improved by addressing internal inefficiencies, time-consuming procedures, and system limitations.

The explosion of standalone AI tools risks making the problem worse as individual task-specific solutions are added to already complex and disconnected tech stacks. When considering new software, don’t just ask whether it solves today’s problem; ask whether it integrates with your existing systems, streamlines the overall journey and genuinely saves time. Otherwise, you risk defeating one monster only to create another.

To help with this issue, we’re working on embedding the power of AI throughout the entire advice journey. Early adopters are currently putting our intelligent engagement assistant, intelliflo IQ, through its paces to schedule meetings, capture client data, record conversations and generate accurate and compliant records. Our analysis shows the resulting efficiencies could reduce the cost to serve by up to 85%.

The speed of AI development and accessibility means change is inevitable. For advice firms, there’s a huge opportunity to use AI to improve efficiency, strengthen compliance and deliver a better experience for both staff and clients. But success depends on adopting it carefully, with a clear focus on security, integration and the human relationship at the heart of the advice process. Then you’ll make sure AI turns out to be more treat than trick.

This article was first published in Financial Reporter on 24 October. Please find a link to the original piece here.