Artificial intelligence (AI) is transforming multiple sectors and financial advice is no exception. This technology offers a wide range of benefits, highly applicable to the financial industry. As clients demand more personalized and efficient services, AI is positioning itself as a key tool in financial advice.
Several players in the financial sector are already using AI successfully, creating digital platforms that manage billions in assets, continuously adjusting investments according to market conditions and the client’s risk profile.
The companies with the largest number of assets under management on digital platforms are those in the chart on the right. But this is an approximate number, and it is estimated that the number of assets under management by AI is significantly higher.
But before I start analyzing the multiple benefits in financial advice, I would like to frame the concept of AI. To do this, I have combined the answer given to me by ChatGPT along with some nuance that I wanted to add.
AI in financial advice refers to the use of advanced algorithms and systems to analyze financial data, predict market trends and provide personalized investment recommendations. These systems can process large volumes of data in real time, enabling them to provide accurate and timely advice1.
AI brings us many benefits, which in the financial sector can be grouped into three main segments:
- Personalization of Advice: AI analyzes the client’s profile and compares it with thousands, providing personalized recommendations according to their risk tolerance and financial objectives. In the words of Rajat Deva2. “AI allows advisors to quickly identify specific client needs and automate marketing, leaving them more time to interact directly with clients.”
- Operational Efficiency: AI automates repetitive and administrative tasks, freeing up time for advisors to focus on strategic tasks and client interaction, relying on predictive models to better understand clients.
- Accessibility and Democratization of Services: AI through “robo-advisors,” automated investment management platforms, make financial advisory services more accessible and affordable to a wider audience, offering near-instant investment recommendations available 24/7.
Despite these benefits, AI is not able to offer human advisor services such as the ability to consider complex personal circumstances or unexpected changes in a client’s situation.
A financial advisor offers a holistic approach considering aspects such as financial planning, tax management or retirement preparation.
This coupled with the fact that an experienced advisor can apply their knowledge and judgment to situations that do not fit predefined models, offering customized strategies to adjust their advice based on unforeseen events. Now then, what is the artificial intelligence revolution in financial advice? In my opinion, this revolution lies in the combination between AI and human advisors, achieving an optimal balance that brings together the strengths of both. AI takes care of day-to-day management, while human advisors focus on strategic planning and complex decision making.
I see the benefits of this collaboration translating into three advantages:
- Data Analytics and Predictions: AI analyzes large volumes of data and makes predictions about the market, helping advisors make informed decisions. Human interpretation is essential to apply this data to the client’s specific context and adjust investment strategies as needed.
- 3Customization of Investment Strategies: AI algorithms create detailed profiles that enable the development of personalized and dynamic investment strategies. These strategies automatically adjust based on changes in the market or client situation. Advisors review and adjust these strategies, considering client conversations and personal circumstances.
- Automation of Repetitive Tasks: AI automates repetitive and administrative tasks, such as data collection, reporting and account monitoring. This frees up time for advisors to focus on strategic advice and client relationships, providing more personalized and proactive service.
The collaboration between AI and human advisors creates a more effective and efficient advisory environment, improving both the accessibility and quality of financial service.
As a conclusion, I would say that artificial intelligence is transforming financial advice, managing huge sums of money and making an industry much more accessible and efficient. Its data analytics, automation and personalization capabilities are revolutionizing the industry, although it is crucial to have the judgment and assessment of a human advisor. The combination of AI and human advisors can offer superior service, marrying the efficiency and accuracy of AI with the judgment and empathy of humans. This is in my opinion, the real revolution we are witnessing and will experience in the coming years lies in the collaboration between the two.
1 Definition obtained after asking ChatGPT What is AI in financial advice?
2 Rajat Deva is Chief Marketing Officer at Savy Wealth, a leading wealth management firm with more than USD 200 trillion under management.
