How will AI change the financial advice market?

28 June, 2023Joshua Downes

As AI continues to gain new and ever more complex capabilities, particularlyOld-fashioned robot grimacing when it comes to crunching data, are financial advisers and paraplanners about to see significant changes in the way they work?

Bruce Ely-Johnston, Chief Commercial Officer at AdviceBridge – a platform that leverages AI to streamline several financial advice processes – gave LIBF Insights his views on what the future may hold.

Why financial advisers need to embrace AI

One reason AI has so much potential to impact financial services is simply the speed at which it can process large amounts of data and perform tasks that would take an adviser or paraplanner several hours to complete.  

“If you went to an adviser right now and said, ‘can you tell me what I’m going to retire on?’ they would turn around and say ‘right, give me all of your information and in six or eight weeks, I’ll be able to tell you,’” says Ely-Johnston. “Our system can tell you that in five minutes and be really quite specific.”

“Advisors who embrace AI now will eventually be able to process clients at unprecedented volumes, getting things done in five hours or less. Meanwhile, those who shun the technology will still be taking 25 – 30 hours.”

AI and financial advice: is the future already here?

There’s plenty of discussion around the future potential of AI – whether it will make our lives easier or whether it spells doom for humanity – but Ely-Johnston is quick to point out that the technology isn’t something that’s in the pipeline, it’s something that’s already upon us.

“The speed of development over the last 20 years hasn’t been particularly quick. Suddenly everything has come on a lot more,” he says. “What you’ve found in the last couple of years is that technology can crunch a lot more data and perform more analyses.”

“Technology is going to change quickly now and those who don’t move with it will miss out because this isn’t going to be happening over the next 20 years, this is going to be happening over the next two or three years.”

Will AI replace paraplanners?

With AI platforms being able to crunch data, analyse the market and compare products at speeds that humans can never hope to match, naturally there are concerns around job roles – particularly when it comes to gathering information and generating reports.

So, are AI platforms likely to replace paraplanners any time soon? Ely-Johnston thinks not.

“There are still things a paraplanner will be needed for. [AI] is just about making something more efficient,” he says. “If an AI system can quickly process a task that would have once taken a paraplanner five hours to complete, then that paraplanner has those five hours back to work on something else.”

“Perhaps you won’t need to recruit another paraplanner to grow, but [AI] isn’t going to completely replace someone’s role.”

Will AI allow big tech firms to take over the financial advice market?

When it comes to the wider advice market, Ely-Johnston points out that the biggest threat doesn’t come from AI technology itself, but big tech firms that may leverage it to enter the financial advice space.

“All it would take would be for Google to acquire a firm like ours and marry it up with something like ChatGPT and they really could just go out to everybody and offer financial advice – it would just be instant,” he says. “They’ve got the client base; they’ve got the contacts. They may not be looking to do what an adviser does in terms of absolutely everything, but Google can go quite a long way in terms of what it can do.”

Which firms are likely to benefit from AI technology?

Ely-Johnston suggests that different advice firms will have different ways of looking at AI and its potential.

“It is change – and not everyone really wants change. You’ve got a way of doing things, a routine. Suddenly there’s a completely new way of doing things,” he says. However, he points out that, whilst many firms will be working on strategies to integrate AI systems, it is likely to be the larger firms that will have the advantage – at least initially.

“[Larger firms] have people within the business that aren’t necessarily working on advice. They are just doing operations or marketing. These are the people that can spend the time on [integrating new AI systems],” says Ely-Johnston.

“Whereas when you’ve got a small advice firm with a couple of advisers who are seeing clients, this is going to pull them away from seeing those clients. So, it is a bit of a chicken and egg scenario for them. Some will see it as a great opportunity, others will simply decide they don’t have the time.”

So, will AI eventually replace human advisers?

“An AI system can carry out some of the work, but clients will still want to spend time sitting with an adviser,” says Ely-Johnston. “The difference is, instead of costing ten hours, it will cost one hour, as the adviser can simply press a button to get all the relevant information more or less instantaneously.”

“Replacing people is not the idea. A system can do a lot of the analysis, but there will always be the need for that human element of advisers being able to talk through a client’s options and understand them better. Are you really going to want to leave it to a computer entirely?”

"AI won't replace the adviser but advisers not using AI may find themselves left out in the cold".

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