Analysing AI’s Impact on Financial Advice, Part 2

In the second part of his series on artificial intelligence Clive Fernandes looks at how the latest developments may impact financial advisers.

Friday, March 29th 2024, 6:09AM

by Clive Fernandes

My previous post in this series looked at AI’s pivotal role in automating various tasks and functions in #financialadvice, particularly regarding back-end processes such as reconciliation, invoice processing, fund accounting, and compliance management. However, the ongoing hype and innovations that continue to impact industries everywhere stem from…

Generative and Customer-Facing AI

Chatbots have become commonplace across websites, social media, or messaging platforms to help businesses handle customer queries, schedule appointments, and respond to commonly asked questions.

Other generative functions can be as simple as various bots and extensions that help save time. For example, Copy.ai quickly generates marketing copy, while Brearly.ai is helpful for summarising articles. Users can highlight a sentence in any search result, and the bot will generate an article on that subject.

Customers and advisors will soon leverage #virtualassistants that provide budgeting and saving resources, personal reminders about financial obligations, and investment advice tailored to users’ details and goals.

With all these solutions, it remains crucial to maintain human oversight for edits and verify the accuracy and relevance of outputs. While AI and related technologies are unlikely to replace human financial advisors completely, AI is enhancing advisors’ analytical capabilities and automating several mundane back-end tasks, reducing costs, improving efficiency, and creating more avenues to innovate. The analytical capabilities of AI continue to grow more advanced and set the foundation for other #generativeAI solutions.

Since OpenAI launched ChatGPT in November 2022, the chatbot has become the fastest-growing consumer application in history. However, this readily accessible solution (particularly its free-to-use platform) is still limited in capability and accuracy.

However, as AI continues to become more advanced and accessible, we’re seeing numerous digital apps and services providing financial advice directly to consumers, which has led to…

The Rise of Robo Advisors

Beyond ChatGPT, numerous other AI-powered financial advisor apps exist, like WallyGPT, Michael AI, FinChat.io, and Jarvis Invest. Many of these platforms provide tailored insights and personalised guidance, often at minimal or no cost to the user.

In Australia, numerous robo advisors, from pioneers like Stockpot and Raiz to OpenInvest and even Commonwealth Bank’s offering, CommSec Pocket for passive investment in EFTs.

Over the past five years, the amount of money managed by #roboadvisors has quadrupled, with fintech companies delivering platforms, apps, and algorithms that make wealth management more affordable for investors.

The net positive is that fintech apps have made financial advice far more accessible, empowering new generations and populations lacking the financial literacy and resources to take control of their financial planning. AI bots and platforms make accessing financial markets simple and affordable, which results in a more robust market and economically viable population.

Kiwis tend to be more independent, making many reluctant to ask for assistance in making financial decisions. Research done in 2020 shows only one in five Kiwis have ever received #financialadvice. Robo advice could be key to bridging this gap by offering cost-free solutions at the click of a button that simplifies financial decision-making processes and delivers intuitive user experiences.

Automated investing is likely to rapidly increase its share of the investment market as it provides a frictionless path to investing. It exchanges personalised advice and human touchpoints for a ‘set and forget’ model that appeals to more passive and casual investors.

With automation, users simply plug into a system their goals, risk appetite, and focus investment themes, such as ESG or tech, and the algorithm recommends a tailored Investment plan. While this model is in its early stages in NZ, there’s a significant opportunity for hybrid models that converge robo-advice and human service to improve national financial growth and literacy.

In the final part of this series, I’ll explore how financial advisors can find the right balance between intelligent technology and human talent, leveraging the best of both worlds to provide a more comprehensive and convenient service to customers.

Clive Fernandes is a director at National Capital.

Tags: AI