The impact of artificial intelligence on financial advice

Andrew Herberts, head of private client investment management at Thomas Miller Investment, comments on the impact of artificial intelligence on financial services and advice and who will be the industry winners. 

There has been some fairly disconcerting commentary on the possible impact of Artificial Intelligence (AI) on our world, but if one puts the potential destruction of humanity aside (a big if), our industry should be looking at the impact it will have on client service and our own role in that service.

AI is here to stay, and may well be to the professions in the current era what the introduction of robots was to the manufacturing industry in the latter part of the 20th century. However, as was the case with robotics in the industrial evolution, we are far from displacing all human input.

AI will be, and is, able to process large amounts of data far better than humans. It takes emotion out of decisions and is therefore, subject to programming parameters, consistent. However, as currently configured, AI will fall short in reacting to new information, proposing novel solutions and be unable to deliver the empathy and understanding that some complex client interactions require.

In the wealth and investment management industry, we are already seeing the inroads of robo-advice into financial planning and, to a smaller extent, investment management.  My contention is that we should embrace rather than fear it. Our profession needs to understand what AI can deliver, where it can add value and then use it as something with which we can deliver better outcomes to clients at lower cost.

There is a core of essentially commoditised work and service that is not available to some clients on grounds of cost. AI can address this directly and could be a profound positive force. It will disrupt much of the commodity side of the industry but equally create a new market for clients who today are uneconomic.

Using AI soundly means industry professionals can focus on adding value to clients, particularly during those significant life changing events where all the powers of empathy, understanding and nuance must be brought to bear – and which AI cannot deliver.

Industry winners will be those that can combine the efficiencies of AI with personal touch, trust and human insight to add real value to clients. Pure models either way will struggle.

It is early in the development of AI tools in the financial services industry, but businesses should already be taking its adoption seriously and planning their business models in light of it.

Companies with confidence in their ability to add value will embrace this coming opportunity and benefit as a result. Companies that do not will be competed away.

 

Andrew Herberts

Head of Private Client Investment Management (UK)

 

Article first appeared in:

Adviser Business Review (on the 21st February 2018)

Investors Chronicle (on the 21st February 2018)

Investment Week (on the 21st February 2018)

 

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