Is your business ready for the AI revolution?

Not a day goes by without another AI article appearing in the trade press or landing in our inbox and, with so much focus on this area, it can often be difficult to cut through the noise. However, I believe that now is the time to take note and to get your business AI ready.

What could AI bring to financial advice?

AI will mean different things to different people and, whilst there are many reliable sources out there to provide a good understanding, there is also a lot of opinion and speculation. So, I think it’s important to be clear what we mean when we talk about the role of AI in terms of financial advice and to stress that AI will become a great enabler, and not a replacement, for sound financial advice.

Looking into the future, the correct utilisation of AI will enable advisers to increase key metrics such as number of households per adviser, and number of products per household, whilst becoming more efficient with admin and paraplanning.

What are the blockers?

These AI benefits however can only be achieved if the back office and core systems are all connected and ready for AI to integrate and sit over the top of the advice process.

I believe there will be a market suitable AI solution within 2024 / 2025, which means there’s a real possibility of IFAs starting to become more efficient and increase household numbers, whilst reducing administration costs, in 2025.

By ‘market suitable’, I mean a solution that can, and has, integrations to all key IFA software such as IO, Defaqto Engage, Dynamic Planner, and Plannr.

The key, as with all systems generally, is to get them all integrated and working together, if you are needing to manually re-enter data or copy from spreadsheets, the full benefit of AI will not be able to be realised.

Firms should look to ensure that they have AI ready systems in place – and, by ‘AI ready’ we mean back-office systems integrating to digital platforms and cashflow planning solutions. Data must be held in a place where it is accessible for automation.

Those firms that are able to do this will be able to realise their goal of servicing more households and to offer a broader service.

Where does it fit in?

AI fundamentally doesn’t mean tech replacing humans, instead it will enable scalability to human tasks. For example, scaling IFAs does not replace the IFA, it enables an improved outcome to the customer whilst a more efficient and lower cost to the IFA. 

Currently in our industry what many refer to as AI is really just machine learning and automation. The most popular AI tool is ChatGPT, which uses language-based learning to fully automate tasks, for example, writing a letter. However, there is yet to be the ability to use ChatGPT from Intelligent Office or Defaqto Engage.

A good measurement to look at in terms of the value AI can offer is in terms of the required amount of administration firms undertake. Typically, firms today will generally need a ratio of one administrator to three advisers. If AI is fully embraced, this could have the potential to become one to nine, meaning firms would have the capacity to service more clients, and more households. Firms would need the right architecture and systems working together to make this a reality. It’s a phased approach and we are well positioned to support firms with this transition.

Ultimately, we will see AI support client servicing and efficiencies. We will see it transcribe tasks such as suitability letter and recommendations, it will update client records and trigger automated responses, ultimately reducing the burden of administration.

In a nutshell…

To reiterate my earlier comments, AI will not replace advisers, it will enable advisers to do so much more, e.g. see more clients – which is something advisers tell us is a priority. It will also lead to good succession planning, administrators, paraplanners, and office managers can become the next generation of advisers.

Ultimately, AI should help to increase access to advice, allowing advisers to service more consumers, including those with less wealth, who will become more efficient to service as costs are reduced and it should pave the way for the next generation of clients to access advice.

Recently published statistics told us that just 8.3% of adults receive financial advice. However, demand for advice rises steadily year on year and we know that customers value human interaction in the advice process. Aligned with that, we have a regulator that stated in its recent Advice Guidance Boundary Review that it wishes existing advice services to thrive to meet this increasing demand. AI will support these objectives and serve to help close the advice gap.

If firms want to be ready when all this comes to fruition, then now is the time to act. Upgrade systems and ensure systems are AI ready. AI will be more readily available in 2025, so firms need to start to get ready now.

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