There’s no doubt artificial intelligence (AI) is already transforming the financial services sector. But is it a friend or a foe?
The theme of AI — the role it currently plays and the impact it could have — dominated the agenda at the Money Marketing Interactive London conference last month.
The benefits are obvious, according to many of our speakers — it can automate time-consuming tasks such as report writing, API (application programming interface) creation and minute taking. This not only improves advisers’ productivity but frees them up to spend more time with clients.
The SJP statement is a clear sign that the regulator means business
AI can also source clean data from reliable sources to help with asset allocation and cashflow modelling.
Speaking at MMI London, Capital Asset Management chief executive Alan Smith said he believed, from a financial planning viewpoint, AI adoption was “entirely game changing”.
He also pointed out that current AI “is the worst it will ever be”, adding: “It’s not quite perfect, but every day it’s going to be getting increasingly better.”
Smith referenced a comment by Google CEO Sundar Pichai, that AI was “the most important invention for mankind since the discovery of fire”.
Embraced by advisers
Schroders head of UK intermediary solutions Gillian Hepburn highlighted recent research by the company, which revealed 57% of advisers believed AI was a “great opportunity”.
From a financial planning viewpoint, AI adoption is entirely game changing
“A significant number — about 48% — said they expected to implement AI in some way within their business within the next two to five years, and about 8% within the next year,” she said.
On a different panel, Saturn AI co-founder Rohit Vaish assured attendees that AI would never take adviser jobs, because “people will always enjoy human interaction”.
Stark warning
However, there was a stark warning that, despite the upsides of AI, it was important to remain cautious and be aware of the dangers.
“You need to be careful how you use AI,” said Almond Financial paraplanner Ryan Sharpe.
Big tech firms can provide multiple benefits, but also bring competition and operational resilience challenges
Compare the Platform founder Bella Caridade-Ferreira said the danger arose when AI was used inappropriately.
She gave an example of a time when she had asked AI to describe her 25-year career and not lie. While half of what it wrote was accurate, she said, half wasn’t.
Big announcement
On the morning of the MMI conference, and following months of pressure and speculation, St James’s Place (SJP) announced plans to scrap its controversial exit fees. This provided the perfect opportunity for a panel discussion about the Consumer Duty and its impact so far.
Just shy of three months after the rules were implemented, panellists had the chance to discuss how firms were faring and whether they thought the duty was working.
Is critical illness called the right thing to enable consumers to understand it?
Roderic Rennison, partner at Catalyst Partners, said the SJP announcement was “a clear sign that the Financial Conduct Authority means business”.
Another hot topic was around Big Tech and how the tech giants could shake up the sector.
“Big tech firms can provide multiple benefits to financial services, but they can also bring competition and operational resilience challenges,” said the FCA’s director of competition, Graeme Reynolds.
Big tech firms have also served consumers who were previously not able to access financial services, which has made it accessible to more of the population, he added.
However, the challenge for a regulator like the FCA is to “allow that innovation to flourish but respond when the tipping point occurs”.
The word ‘critical’ to a consumer often makes them think about death. That’s not necessarily what CI is about
Reynolds said the financial advice sector had not yet experienced the same Big Tech intrusion seen by other sectors. For example, deposits, mortgages and pensions remain untouched. However, “developments in other regions suggest this is very much possible in the near future”.
He added the regulator must “keep an eye” on large, regulated firms such as Amazon, Google and Meta — due to their unrivalled access to consumer data — to ensure these companies do not gain an unfair advantage.
People matter
Meanwhile, in an afternoon session, advisers were encouraged to consider the people as well as the technology when selecting a platform.
Scottish Widows head of platform proposition Ross Easton said: “The reality is people do business with people. While the technology side of it is really interesting, quite exciting, if you can’t cover both bases you’re going to have quite a strange experience.”
Smith referenced a comment by Google CEO Sundar Pichai, that AI was ‘the most important invention for mankind since the discovery of fire’
Easton added: “When you’re thinking about platform selection, look at the end-to-end thing. Think about the full value proposition; ask about the future development plans; ask about the investment profiles going on — because these things are really important.”
There was also a debate around how tech could help close the adviser gap and what could be done to make the profession even more attractive to younger generations.
CI terminology
Away from tech and AI, there was an interesting discussion on the term ‘critical illness’ (CI) and whether the time had come to re-evaluate it.
Robyn Allen, partnership development manager at The Openwork Partnership, believes so.
“The word ‘critical’ to a consumer often makes them think about death,” she suggested.
“That’s not necessarily what it is about; it’s not generally something that’s life threatening. It can be, but it’s more leaning towards life altering.
When you’re thinking about platform selection, think about the full value proposition; ask about the future development plans; ask about the investment profiles
“It also doesn’t have to be caused by an illness; it can be due to an accident. So is it called the right thing to enable consumers to understand it? That’s also something to consider.”
When asked what CI should be called instead, panellists agreed the word ‘serious’, rather than ‘critical’, would perhaps work better.
ESG ‘minefield’
Environmental, social and governance (ESG) matters continue to be at the forefront of many companies’ minds. One debate was on how to advise clients through the ESG ‘minefield’.
Panellists discussed whether advisers should bother with ESG ratings agencies, how to not ask leading questions of clients, and the most reliable ESG tools on the market to help advisers.
Current AI is the worst it will ever be
Meanwhile, the assets under administration model is no longer viable for advisers serving the next generation of clients, FTRC director Ian McKenna insisted. He said younger clients generally “do not have enough assets to generate enough income” via the traditional model.
In another session, Octopus Investments key partnerships manager Julie Greenwood explained why inheritance tax was a growing concern and outlined the solutions available.
You can now register your interest for Money Marketing Interactive 2024 in London via the following link.
This article featured in the November 2023 edition of MM.
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AI will be required, but the benefit of face to face human professional qualified advice cannot be beaten. We have in the industry a shortfall of qualified IFAs and AI can assist where demand falls short and younger clients will engage with AI as they won’t feel that engaging with an IFA in their 60’s is good long-term financial planning.