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BusinessDay: AI is reshaping the financial advisory space

The best-case scenario is a hybrid model where humans and AI work together, maximising the strengths of each.


By Johan Steyn, 24 May 2023


Artificial intelligence (AI), with its broad scope and myriad applications, is transforming the financial advisory space. It offers the potential for enhanced efficiency, reduced error rates, and personalised services, thereby driving a significant shift in this industry.


AI subfields such as machine learning (ML), natural language processing (NLP), computer vision, robotic process automation (RPA) and expert systems are being deployed extensively.


ML, for instance, leverages historical and real-time data to predict market trends, helping advisers formulate effective strategies. NLP, as seen in AI chatbots such as ChatGPT, is revolutionising customer interaction by delivering instant, accurate responses to queries.


Optical character recognition, a branch of computer vision, enables the automation of paperwork in a call centre by accurately reading and extracting data from documents.


RPA streamlines repetitive tasks such as data entry, ensuring accuracy and speed. Expert systems, with their knowledge databases and inference engines, can make recommendations based on specific client needs, mimicking the decision-making ability of human experts.


These AI subsets provide remarkable capabilities. They can digest enormous volumes of information, summarising lengthy reports, policy documents, and regulations, which would otherwise require significant human hours.

Sentiment analysis, another AI application, can interpret emotions from client emails, reviews and feedback to identify patterns, helping advisers enhance their services.


AI can also provide a personal touch to client interactions. Algorithms can customise communications, from birthday messages to annual reviews, making clients feel valued.


Advanced analytics can glean insights from client data to understand their preferences and behaviours, enabling financial advisers to offer personalised investment advice.


There are indeed some tasks that smart technology cannot wholly replace. The role of humans becomes crucial when it comes to understanding client needs on a deeper, emotional level, and making decisions that require a high degree of human judgment and ethical considerations.


The best-case scenario, therefore, is a hybrid model where humans and AI work together, maximising the strengths of each.

Looking five years into the future, we can foresee a landscape significantly influenced by AI. With the exponential growth in computational power and AI capabilities, we can expect automation to be pervasive in the financial advisory space.

AI is likely to handle the majority of routine tasks, while humans will focus more on strategic and relationship-building aspects. The advisory process will become increasingly data-driven, with AI tools predicting market behaviour and individual client preferences with ever-increasing accuracy.


However, we should also be mindful of the challenges that come with AI, such as data privacy, algorithm bias, and the need for explainability in AI decisions.

Financial advisers, therefore, need to prepare for this future by acquiring relevant digital competencies and focusing on areas where human intuition and judgment are irreplaceable.


A significant aspect to consider as we adopt AI in the financial advisory space is regulation. With the potential for misuse of data and the need for accountability in AI-based decisions, regulatory bodies worldwide are scrutinising these technologies more closely.


Data privacy regulation has strict stipulations on data privacy, mandating transparent handling of client information. Therefore, financial advisers using AI must ensure that their systems adhere to such regulations to avoid legal repercussions.


Regulatory tech (RegTech), a field that combines AI and ML to automate compliance tasks, is rapidly evolving to meet these needs. Thus, while AI can revolutionise financial services, its usage should align with regulatory norms to ensure responsible and ethical operations.


AI presents a wealth of opportunities to transform the financial advisory industry, making it more efficient, personalised, and forward-thinking. By embracing AI and its advancements, financial advisers can carve a path to success, ensuring their relevance in a dynamically evolving financial landscape.


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