AI is the next big thing, and I am not just referring here to my company brand. I mean artificial intelligence, or so-called machine learning technologies. The impact for financial advice and advisers is positive, profound and, I have to say, imminent.
When global information technology research firm Gartner issued its strategic technology predictions for 2017 last October, the top 10 list was led by the themes of artificial intelligence (AI) and advanced machine learning.
As Gartner’s report said:
“During the next 10 years, virtually every app, application and service will incorporate some level of AI in much the same way as consumer appliances have incorporated microprocessors.
“Some of these apps will be obvious intelligent apps that could not exist without AI and machine learning. Others will be unobtrusive users of AI and machine learning that provide intelligence behind the scenes.”
(Source: Gartner Top 10 Strategic Technology Trends for 2017, October 2017: Cearley, Walker, Bourke)
Artificial intelligence – or intelligence behind the scenes - is the new game in town for financial advice.
Alongside the emerging ‘real world’ trend towards goals-based advice, the combination of both has significant future benefits for clients and the highly efficient and scalable financial advice practices that serve them.
Will consumers expect more from their service providers? If the trend in retail shopping is any guide, consumer demand for smarter, more intuitive technology will be all pervasive.
Writing in Forbes last November, Gartner chief of research Daryl Plummer wrote that by 2020, 100 million consumers would be shopping in some form of augmented reality. Just as Pokemon Go was a huge gaming trend during 2016, immersive technologies will fundamentally alter the meaning of consumer digital experience and engagement.
This has fundamental consequences for the financial advice sector.
Plummer also noted that in the next three years, algorithms will positively alter the behaviours of over 1 billion workers. He noted that US investment bank JP Morgan Chase already uses an algorithm to forecast and positively influence the behaviour of thousands of investment bank and asset management employees to minimise mistaken or ethically wrong decisions.
The compliance opportunity alone - to reduce costs and improve the efficiency of a highly manual process for Australia’s banking and financial services sector - including financial advice, is clearly significant.
The impact for financial advice
So, what does this all mean for the financial adviser and licensee?
Firstly, from a legalistic point of view, the current compliance & regulatory burden can be significantly eased. But first, the frameworks for compliance need to become embedded into the supporting technology.
Currently, the advice process is supported by so-called 'legacy systems', which in turn don't support the current (and growing) regulatory frameworks. It’s a catch-22 that we at Adviser Intelligence (a.i.) are focused on.
What 'today’s systems' require is better monitoring of advice suitability and compliance parameters, and to automate these.
AS JP Morgan Chase would understand, it takes less errors for a system to check and monitor an SoA and to match data points across scale, than it is to employ humans to carry out checks in a persistent and proactive setting, preventing a non-compliant advice experience for a consumer.
Artificial intelligence and machine learning will assist all aspects of the advice process and compliance checks.
Secondly – engagement. The technology advances coming will help to empower consumers to manage their entire wealth on a mobile device. Everything from tracking their goals, cashflow (spending & savings), portfolio, banking, mortgage, insurance and advice strategies, all delivered as an inspiring and user-friendly digital experience.
Technology can also enhance the initial client engagement experience, making it a positive and inspiring wealth experience for the consumer. With tools that can plot a client’s goals, conduct real-life ‘what-if?’ and decision scenarios based on their real-time actual position and map these to strategies for better financial discussions - adding true value to the advice process.
New systems may also self-determine the most optimal strategy and actions to meet all a client’s goals and objectives, within compliant preliminary parameters.
The system should also automatically track a client’s goals to advice strategies and the client’s fees relating to their service package, which offers a better informed, transparent outcome to their wealth journey.
It’s a new World
As we see increasing evidence of change and an emerging new world order in the geopolitical sense (Donald Trump as US President, and the UK’s Brexit vote as examples) we also must keep an eye to the emerging technologies that will fundamentally shape our experience as ordinary citizens and as trusted financial advisers.
I believe that the year 2017 will deliver a convergence of trends: a four-way crossover point where goals-based advice, security of compliance outcomes, consumer trust and new technologies merge.
Any fears that we humans may have about being replaced by machines are understandable, but to my mind are unfounded. The reality is that new digital technologies – primarily artificial intelligence behind the scenes – offers a way to enhance and augment, not replace, the role of the human adviser.
We stand at the beginning of an exciting new phase for the delivery and management of professional financial advice, where machines have the capacity to support the constant improvement, education, financial literacy and ultimate wealth and lifestyle outcomes of every single client.