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, artificial intelligence and advanced machine learning themes led the top 10.
“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.”
Artificial intelligence – or intelligence behind the scenes – is the new game in town for financial advice as well. It sits alongside the emerging trend towards goals-based advice. The combination of both has significant future benefits for clients and the highly efficient and scalable practices that serve them.
Consumers will demand more
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 Gohelped spark a huge gaming trend during 2016, immersive technologies will fundamentally alter the meaning of consumer digital experience and engagement.
This has dramatic consequences for the financial advice sector.
Plummer also noted that in the next three years, algorithms will positively alter the behaviour of more than 1 billion workers. He noted that US investment bank JPMorgan Chase already uses an algorithm to forecast and influence the behaviour of thousands of employees in investment banking and asset management, to minimise mistaken or ethically wrong decisions.
The impact on financial advice
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 advice practices – is clearly significant.
So, what does this all mean for the financial adviser and licensee? Artificial intelligence and machine learning will assist all aspects of the advice process and compliance checks.
Firstly, from a legal point of view, the current compliance and regulation burden can be eased. However, the frameworks for compliance need to be embedded within the supporting technology to do this.
The advice process is now supported by legacy systems, which don’t support the current (and growing) regulatory frameworks. We at Adviser Intelligence (a.i.) are focused on this.
What systems require today is automation of advice suitability and compliance parameters, and monitoring of these.
As JPMorgan Chase would understand, a system can check and monitor a Statement of Advice with fewer errors than humans can, preventing a non-compliant advice experience for a consumer.
The emerging technology will enhance consumer engagement as well. The advances coming will help empower consumers to manage all of their wealth on a mobile device. Everything from tracking their goals, cashflow (spending and savings), portfolio updates and banking, to details on mortgages, insurance and advice strategies, will be delivered within an inspiring and user-friendly digital experience.
Technology can also enhance the initial client engagement, making it positive and inspiring for the consumer. Tools can plot a client’s goals, conduct real-life ‘what-if?’ scenarios based on their actual position, and assign strategies for better financial discussions.
New systems may also determine the optimal strategies and actions to meet all of a client’s goals and objectives within compliant parameters.
The system should also automatically track whether the strategies prescribed for clients are aligned to their goals, and the appropriate fees for their service package, offering a better informed, transparent projection of their outcomes.
It’s a new world
As we see increasing evidence of change and an emerging new geopolitical order (with Donald Trump as US president and the Brexit vote as examples), we also must keep an eye on the emerging technologies that will fundamentally shape our experience as ordinary citizens and as trusted financial advisers.
I believe the year 2017 will deliver a convergence of four trends: goals-based advice, security of compliance outcomes, consumer trust and new technologies.
Any fears we humans may have about being replaced by machines are understandable but to my mind unfounded. The reality is that new digital technologies – primarily AI – offer 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.