Ian McKenna: AI advice is a done deal; get used to it

Readers’ comments on Money Marketing editor Tom Browne’s recent article, Advisers are better than technology is ‘a big lie’, says Ian McKenna, were mainly unfavourable.

Headlines aim to attract readers’ attention, and MM is excellent at doing that. I suspect some commenting reacted to the headline alone.

Once you got past that, though, Tom produced a balanced summary of my keynote at the Artificial Intelligence in Financial Advice conference.

I stand by my conclusions and want to use this column to provide my rationale.

Artificial intelligence (AI) is an unparalleled challenge to professionals and knowledge workers. Many occupations – from graphic designers to accountants, lawyers and journalists – are vulnerable to its disruption.

So, the advice community cannot expect to be immune.

Firms making best use of AI have far more to gain than lose from such innovation, but the reality is several systems capable of conducting the technical analysis of a client’s situation and presenting financial advice already exist.

For example, Destination Retirement, from Hub Financial Solutions, is an automated advice offering now available for firms who want to find a new home for clients they can no longer economically service under Consumer Duty.

In creating a decumulation plan for a client, it runs between three and seven million calculations to find the optimal scenario based on an individual’s personal circumstances, projected mortality and the tax treatment of the different investment vehicles they have, among a range of other features.

How many permutations could a human manage?

Equally, the tools from Conquest Financial Planning can run on full automated-advice mode, be controlled entirely by an adviser, or sit somewhere in between.

Although not currently available in the UK, FP Alpha has been offering a service for several years where an adviser can scan an individual’s estate planning information in and it will produce a complete new estate planning recommendation. I could list multiple services in the US with the same ability.

The above are predominantly built on machine learning. As we get into generative AI, the opportunity becomes even greater.

Elon Musk has already said he intends to turn X into a vehicle covering all areas of finance. Musk’s ambition is not new, as identified in MM last year.

As I see it, there are three key points to consider here.

First, the advice profession currently supports, at best, 5% of the UK population. This leaves a massive underserved market. Many of these consumers would prefer face-to-face advice but cannot afford it. Which is better – no advice or advice delivered using technology?

Equally, why would an adviser not want to use technology to do the analytical heavy lifting in the advice process and, if that is acceptable, why should such technology be limited only to use by advisers?

Finally, as the technology gets better and better at carrying out the functions humans used to perform, it’s important to focus on the areas where it (so far) has yet to reach the same standard.

The highest standards of financial advice will evolve as a service where the adviser has a deep understanding of an individual’s psychology, thought processes and learning styles.

It will be the interpersonal skills that differentiate human advice from the digital experience. Technology can liberate advisers to develop that deeper understanding by removing much of the traditional administrative regulatory burden.

Ian McKenna is founder and director of FTRC