Fintech and AI

Can AI help to improve trust in financial advisers? This is an excellent question on AI and trust, and perhaps one that will arise more and more in any industry, not just Fintech, as AI grows and evolves.

This question surrounding AI and trust in financial advisers can be considered by looking at the skills and knowledge of financial advisers combined with the capacity of AI tools like ChatGPT.

While it is true that anyone can use AI tools to assist with personal finances, the output of the data generated depends on knowing how to frame your input. Generally speaking, financial advisers will be better equipped than the average consumer when it comes to inputting the correct information to generate the best and most helpful result. The question surrounding trust, however, might depend entirely on people developing trust in AI before it can valuably contribute to the finance sector.

For more detailed insight, we caught up with Richard Hilsey, one of our Digital Transformation Experts here at Mindera; he had a lot of cool stuff to share with us!

Richard On AI, Fintech, and Trust

The growing popularity of generative Artificial Intelligence (AI) tools like ChatGPT has thrust AI into the public’s consciousness and emerged as a transformative opportunity for the financial services industry. However, the fact remains that AI is still in its infancy.

While AI’s potential is indeed exciting, in such a highly regulated industry where a human touch is often the foundation of trust, it begs the question: Is AI mature enough to be a reliable tool in financial services, and are financial advisers ready to rely on this technology?

AI does a great job of emulating human-like interactions. Online chatbots are a good example of how AI uses everyday language in a support-like function, which is not entirely dissimilar to the way a financial adviser interacts with a client. As a result, we have seen the introduction of “robo-advisors”, also known as automated investing services, which use algorithms and software to build and manage an investment portfolio without any human interaction.

Sounds like a dream for time-poor clients. But while AI can act like a human in a digital sense, it can’t give you a handshake. It’s a crude metaphor, but the point is that AI can’t decode the emotional nuance behind a client’s financial goal, can’t recognise risk appetite beyond hard numbers and data, and can’t get a deep level of understanding of a client’s needs and what matters to them beyond tangible financials.

So, while automated advice does have a role to play in helping to democratise financial advice, sentiment analysis, and providing truly tailored counsel, is impossible for AI. Given the deep knowledge that a financial adviser will have about a client’s financial situation, building trust and positive relationships can sometimes be years in the making and is something only a financial adviser can really do.

What AI is incredibly good at is automating manual monitoring and research tasks, which can be tedious and time-consuming, meaning financial advisors can spend more meaningful, value-driven time with clients. For example, interpreting the information produced by AI - such as market trends and synthesised information about past advice and interactions - against the client’s current and future requirements. In this respect, the combination of data-driven insight and a financial adviser’s expertise is a match made in heaven. For some clients, being able to show the rigour and hard numbers behind any recommendations can go a long way in building trust.

Where financial advisers do need to be cautious is around the ethics of AI, which is a big issue driving current mistrust in the technology. If an AI model is not built and trained correctly, its output can be prejudiced and result in bias. This, among other issues such as safety, transparency and accountability, all pose challenges for the financial services sector.

Understanding these risks, MPs called on Rishi Sunak’s government in August to introduce new legislation to control AI or risk falling behind the EU and the US in setting the pace for regulating the technology. The EU is working on the AI Act, and in the US, a blueprint for an AI Bill of Rights has been published. Until international standards on regulation are set, fears about its use are likely to remain, especially in a highly regulated industry like financial services.

If I go back to the questions I posed at the beginning: Is AI mature enough to be a reliable tool in financial services, and are financial advisers ready to rely on this technology? My answer is, unfortunately, no. While there are smart ways for financial advisers to embrace the opportunities that AI can offer, some of which I have outlined here, ultimately, the technology is not advanced enough to wholeheartedly depend on. Its current implementation depends on financial advisers being able to “mark the homework” of AI to effectively meet a client’s short, medium and long-term goals.

To Wrap up

As Richard concluded, AI definitely has its uses within the finance sector; however, with concerns like ethics, confidence, and data input/accuracy, it is still in its early stages, especially when it comes to something as reliant on personal relationships and trust as financial services. Of course, the technology can be embraced to streamline research and data processes within this industry, but until AI evolves further, it’s best to continue placing trust in the experts!

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