The relationship between AI and financial advice

Last year, Jessica Rusu claimed that AI could “transform” financial services.

The Financial Conduct Authority’s chief data, information and intelligence officer pointed to better customer outcomes and quicker fraud detection as two of the key benefits that AI can provide, whilst also warning of potential risks.

A boost for advisers and their clients 

Rusu was not claiming that AI would make advisers redundant, but rather the opposite. Large Language Models (LLMs) can recognise, translate, predict or generate text or other content from huge amounts of data. 

The use of AI in the financial sector isn’t something hypothetical. Over 50% of CFA Institute members claimed that AI is already a routine part of data analysis at their firms. 

The risks

Data privacy: For AI to be effective, it needs a wide range of data to make it work. Protecting data privacy will remain paramount and become more challenging as AI technologies continue to evolve. 

Job displacement: Whilst people will likely always want to speak to advisers face-to-face, there is a credible risk - as with most industries - that AI will become more effective than people at completing certain tasks. 

Technical issues: As with all technologies, AI has the potential to go wrong. An AI system could malfunction or be targeted by hackers. It’s critical that cybersecurity systems are revisited to assess AI cyber vulnerability.

Final thoughts

Whilst AI can optimise data and create new and compelling tools for advisers, some clients will always want to interact with another person directly. This is not limited to financial advice, with nursing and therapy other examples of roles where human interaction is highly valued. 

It will be fascinating to see how the scale and rate at which AI impacts the wider industry; while we can predict certain outcomes, the overall impact remains to be seen.