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Are financial advisers under threat from AI? | Trustnet Skip to the content

Are financial advisers under threat from AI?

16 November 2023

With most UK investors encouraging the use of AI in financial planning, the adviser business model could be forced to adapt.

By Tom Aylott,

Reporter, Trustnet

Most UK investors support the continuing integration of artificial intelligence (AI) into financial planning, which could bring the role of advisers into question.

A recent study by Avaloq revealed that more than two-thirds (69%) of UK investors are comfortable with AI being used in their investment decision making, with 15% happy to remove the human element altogether.

Jason Hollands, managing director of Bestinvest, said there was little doubt in his mind that AI will make many roles obsolete through the creation of new jobs, with the financial services sector being no exception.

However, a scenario in which adviser firms are driven solely by algorithms will not happen any time soon. These companies will integrate AI into their services over time, but it will be to assist the human advisers running them.

Hollands said: “In the short to medium term, while AI will be used in numerous ways to process vast amounts of data to help profile clients and get better insights, identify investments that meet certain characteristics and generate tailored client communications, this will be used alongside qualified and regulated human advisers.

“Rather than sweeping away financial advice delivered by real people altogether, I think firms that embrace AI will use it to help them do their jobs more efficiently and widen the universe of clients they service.”

Although the Avaloq study reveals the general direction of travel, GDIM investment manager Tom Sparke said there was little appetite for purely AI advisers, as demonstrated by the 85% of people who would be uncomfortable without human involvement.

He note that most AI models in their current state make frequent errors and cannot be relied upon to produce accurate results, so investors will be unwilling to hand responsibility of their savings over to algorithms.  

Sparke added: “AI will become an ever larger part of investment processes at every stage, but I find it difficult to envisage a completely autonomous, unchecked process.

“Aside from the point that people tend to prefer dealing with people, there is a question of where liability sits when problems inevitably occur.”

Indeed, IBOSS marketing manager Mark Douthwaite agreed that while advisers will be strengthened by AI, there will always be a need for human discretion.

Imbedding algorithms into the process could save advisers hours of work combing through fund data, but it can miss out crucial elements when it comes to making sound choices.

Douthwaite said: “The decision-making process within our team acknowledges there is often as much art as science and there will still be decisions that need to be made that will require industry, and real-world experience, as well as human instinct that would be almost impossible to replicate.

“Regarding whether AI is a threat to the adviser business model, we believe the personal human touch and emotions that a financial adviser can offer a client will be very hard to replicate within the foreseeable future.”

Instead, AI could be best utilised by DIY investors, according to Douthwaite. It would break down complex data, increasing accessibility to investing and allowing retail buyers to build and manage their own portfolios with greater ease.

Nevertheless, Douthwaite and other advisers come across a broad range of clients facing vastly different circumstances, so a human touch will always be needed when making decisions that could significantly impact people’s futures.

“No artificial intelligence or software tools will be able to replicate the crucial ongoing discussions between the adviser and their clients when it comes to planning their financial futures,” he added.

“Individual client circumstances differ drastically from client to client and different stages of a client’s investment journey remain complex, such as decumulation at retirement stage, where an adviser’s professional know-how, soft skills, and expertise will remain imperative.”

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