In this fast-changing environment for financial services, AI shows huge potential to significantly change the way advice firms work and the relationship of financial advisers with clients.
As we reach the threshold of a new age in finance, it has become incumbent on professionals to understand the potential of AI in transforming their services compared with adapting to its general adoption.
The list goes on regarding the various uses of AI in finance, from predictive analytics to automated portfolio management and developing AI-powered chatbots that can further aid in fraud detection.
Based on the figures provided in this article, the next 12 to 24 months are likely to be an intensive period of change in history respecting how financial firms are run and how advisers conduct their business.
We take a closer look at the part AI will play and what financial adviser business owners must know now.
AI has been, is, and will be the backbone of financial services
AI’s market size in fintech alone is expected to increase from US$9.45bn (£7.3bn) in 2021 to US$ 41.16bn (£31.8bn) by 2030 at a compound annual growth rate of 16.5 per cent, according to Grand View Research.
This explosion into growth will be across some key areas, including improved decision-making and risk management.
The predictability of financial outcomes will heighten as AI algorithms continue to increase in sophistication in the way they analyse and consequently control market trends.
Therefore, one would expect more accurate risk assessments with possibly higher returns to clients.
AI-powered tools will change the way firms interact with their clients.
A bot technology can respond to client enquiries, freeing advisers’ time for complex strategic planning.
These AI helpers will be capable of providing personal investment advice following real-time market data and client profiles.
These machine learning algorithms will represent an initial line of defence against financial fraud.
By 2025, according to some estimates, AI systems will be able to detect and prevent up to 60 per cent of fraudulent transactions in real time.
To be at par and relevant in this competitive AI-driven scenario, financial advisers need to ensure their technical and behavioural skills are up to date.
These are the key areas they should focus on:
Competency in AI and data analytics
AI tools should be at the command of any wealth manager and adviser.
Moreover, all such professionals are well advised to be able to make sense of data analytics.
Emotional intelligence and being human
As AI takes over routine tasks, the human elements in financial advice are going to be paramount.
Advisers will need not only highly developed emotional intelligence and complex communication skills for empathetic and contextual understanding but also those which AI can't emulate, such as ethical judgement and nuanced decision-making.
Advisers will need to understand the ethical use of AI in finance.
They will be relied upon to identify and reduce prospective biases of AI algorithms so that each client gets a fair deal and unbiased financial advice.
