I think it’s time for a more candid reassessment of the impact of AI on financial advice, because much of the commentary over the last few years simply hasn’t been true.
If you want a good understanding of the full potential of artificial intelligence, I’d recommend watching Cleo Abrams’ interview with OpenAI founder Sam Altman on YouTube.
The overwhelming majority of people talking about AI in our industry are suggesting that it won’t take jobs away. This is unrealistic – indeed, AI is replacing jobs in advice firms now.
If, as Altman suggests in the interview, ChatGPT8 will likely enable us to find cures for individual cancers, it will be able to give financial advice. I mean, which of the two is harder?
A regular barrage from PR companies currently promotes surveys or research suggesting AI is not effective at giving financial advice, but how much time did they spend getting the settings right?
If you refine AI, what you can already produce is stunning. I watched Robert Kirk from InterGen Data build a detailed financial plan, in real time, from just a single prompt.
Admittedly, this was an incredibly well crafted prompt – and Robert had made all the changes to the AI he was using.
All knowledge work will be impacted by AI. Lawyers and accountants are already cutting staff
This is not surprising; he is a world-class AI engineer. But if you know what you are doing, that is what can be produced already.
AI is already replacing humans in financial advice firms. For example, Jane Hodges of Money Honey Financial Planning, one of the most innovative advisers in the country when it comes to using technology in her practice, has replaced her paraplanning team with AI.
AI has also enabled the Money Honey admin team to produce draft suitability letters and financial life plans.
Jane Hodges will not be alone; indeed, I have been saying for some years that paraplanners need to consider how they can evolve their roles.
As part of our recent consumer research, ‘Building the Business Case for Digital Advice’, we asked 4,000 consumers about their attitude to digital advice, how much cheaper they would expect it to be than traditional advice and how likely they were to switch.
Notably, clients with financial advisers were the group who said they were most likely to move to such a service.
This makes a compelling case for digital advice being part of every adviser’s offering – and it is nowhere near as difficult as it used to be.
AI will have a dramatic impact on the world of financial advice and it is an incredibly powerful tool to work with.
The reality is that advice firms today can already be vastly more efficient if they’re using AI
All knowledge work will be impacted by AI. Lawyers and accountants are already cutting staff and the current shortage of insurance underwriters must be linked to these roles being frequently identified as inevitably replaceable by AI.
Of course, it is hugely important to take care when adopting AI services, including being absolutely clear where your data is being stored, that it’s not being used in any way for training, and that you carry out full due diligence on the supplier.
However, the reality is that advice firms today can already be vastly more efficient if they’re using AI.
Advisers planning to sell their firms in the next year or so may not see this as an issue. That’s one view, but historically, consolidators bought advice firms without technology and multiplied their value by bringing it in.
A business that has made itself lean and profitable through the use of AI will be far more valuable than the one that hasn’t.
Do you want to receive that value yourself, or are you happy for the next person to benefit from what may be a two-to-three-times increase in the value of the business?
After 30 years studying adviser technology, what I am seeing is AI transforming advice firms like never before.
Not only are many firms now implementing it, but it is also catalysing their adoption of wider technology. Have you written your AI strategy? If not, it should now be an urgent priority.
Ian McKenna is the founder of AdviserSoftware.com
