How will artificial intelligence affect financial services?

AI simulates human intelligence in machines designed to think and act like humans. These can perform tasks that typically require human intelligence, such as visual perception, speech recognition, decision-making and language translation.

Machine learning (ML) is a subset of AI that uses algorithms and statistical models. Put simply, it enables computers to learn from data without being explicitly programmed.

Deep learning (DL) is machine learning, inspired by the structure and function of the brain, also known as artificial neural networks. It uses multi-layered neural networks to automatically learn from large amounts of data.

In the short term AI can be an enormous benefit to the financial advice industry.

This has been particularly successful in tasks like image and speech recognition, natural language processing, and video analysis.

Natural language processing (NLP) is AI that focuses on the interaction between computers and humans using language as we do. It enables computers to understand, interpret and generate human language that is both meaningful and useful. 

Overall, AI encompasses machine learning, natural language processing and deep learning, among other things.

Machine learning and deep learning are subfields of AI that focus on using algorithms and statistical models to enable computers to automatically learn and improve their performance on specific tasks, while NLP is a subfield of AI that focuses on enabling computers to understand and interact with human language.

In the short term AI can be an enormous benefit to the financial advice industry. It will do repetitive tasks for us very quickly and also some complex tasks that machines may find easier than we do.

For example, a major challenge under consumer duty is to produce documentation and information that is understandable to consumers.

Given the average numeracy and literacy ages in the UK are 11 years, this presents an enormous challenge to the industry. AI like Chat GPT (generative pre-trained transformer) can give you not only the ability to write text on a particular subject, but it can also convert it into a particular reading age or other focus.

In an industry full of highly competent technicians, I suspect we will find it very difficult to write documents to a particular reading age, however, software like this can provide a solution to this need.

Like many professions it is easy to get caught up in the technicalities of what we do and there is very little training in our industry around articulating issues more simply. Writing simply is in practice more difficult than writing technically. This is just one example of how AI can help us do complex things more quickly.

AI in practice

Artificial intelligence is far from new to the UK market. In financial services, a few organisations have been delivering it for some time.

Probably the most sophisticated AI/ML-based financial planning system in the UK is the Conquest Financial Planning proposition from Fidelity. This shows what should be normal in just a few years. 

A growing number of firms are looking towards these systems as a key element of their processes to address consumer duty.