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Why advisers should embrace AI’s potential

  • Understand how AI is affecting the advice process
  • Gain an insight into the FCA's concerns about AI
  • Be able to describe the types of AI being deployed
CPD
Approx.30min

Recent developments in AI look set to change the landscape even further. One of these, according to Chris Ford, co-manager of Smith & Williamson’s Artificial Intelligence fund, is robotic process automation, which is likely to affect not only adviser practices but the whole of the personal finance industry.

Mr Ford explains the relevance for intermediaries is that such technology can synthesise and optimise administrative tasks, largely in the back offices and middle offices of financial services institutions, which could be particularly helpful for satisfying ‘know your customer’ rules.

“[Know your customer is an area that’s] heavily regulated, lots of sanctions and fines if you don’t do it correctly; that’s exactly that type of stuff that AI, and RPA in this instance, is extremely good at – where humans tend to make mistakes, don’t pay attention, go for a restroom break, go for a coffee, have lunch. It then frees up humans to do the things that they’re good at.”

Data gap

Still, questions have been raised as to whether, on some level, advisers should be concerned about the possible impact of algorithms on the future of their roles.

Andrew Todd, chief technology officer at Iress, explains that the risk of developments of this kind will vary from company to company and should be minimal for modern advice firms.

“If the business is relationship-based where success depends on quality of service, engagement, efficiency and client outcomes, AI should be embraced,” he says. 

“From a competitive perspective, advisers should fear AI in the hands of their competition who are utilising it to create a better experience for their clients. Operational efficiency and higher-quality servicing can be supported by AI, and these are key to winning in a competitive market.” 

But Mr Todd adds that AI is more about supporting the role of an adviser, rather than replacing it.

“Those that have thought about client-first models where technology is seen as a whole-of-business enabler have started to, and will increasingly, see benefits from AI. Such developments are currently strongest around the areas of compliance and risk management/prevention, but also extend into enabling business development, client-servicing capabilities and enhancements, as well as portfolio-modelling support and execution.”

He does, however, expose a fundamental problem with embracing these improvements. “AI is only as good as the data it draws on, and this remains a gap for many advice businesses,” he says.