Artificial intelligence (AI) has significantly changed how many advisers are thinking about technology and its future in their businesses.
That said, so far, beyond automating communication functions, most current adviser AI services in the UK lack a transformational case.Visiting Future Proof, the wealth, wealth tech, social science and music festival in California recently, I saw several new systems demonstrate how AI can scale advice and serve vast numbers of consumers who are currently uneconomical in a profitable and fully compliant way.
It would bring enormous benefits to consumers and usher in a highly profitable golden era for advice firms. In both the UK and US, a growing number of organisations are offering estate planning services to advisers. From what I’ve seen, some US propositions are significantly more sophisticated than anything on offer here.
Because of our regulatory structure, it is unlikely many of the leading-edge US services will want to come to the UK
I’ve written previously about New York-based FP Alpha. Its expert system enables advisers to guide clients through highly complex scenarios outside their normal specialties. For example, it has recently launched its property and casualty snapshot to help clients understand their personal insurance needs as well as their wealth. At Future Proof, Wealth.com demonstrated their built for advisers, by advisers, estate planning tool which links to attorneys in every US state and allows advisers to scan in existing state plans so the AI can assess them and produce comprehensive client reports.US estate planning is vastly more complex than the UK. Each individual state can have major variations in their tax rules. Deploying such technology to the UK would be a relatively simple task, given the consistency of our tax regime. Conquest Financial Planning, which already operates in the UK, also showed its next generation automated planning tool which will soon be able to be operated by human conversations.
Meanwhile, Alphathena demonstrated an exceptional AI-driven direct index solution that can be refined to deliver the precise needs of individual investors. This is a further example of the sort of technology I expect to significantly disturb the platform market over the next few years.
If you can meet FCA standards, you can roll out pretty much anywhere
While direct indexing is relatively new in the UK, it has become a major trend in the US. It is expected that 25% of passive investments will move from ETFs to direct indexing by 2030. The service enables the creation of a direct index based on over 1,000 ETFs and indices that can be totally personalised based on over 100 different factors, including ESG. My favourite tech at Future Proof was the new Advisor Core service from Your Stake. According to founder Patrick Reed, its AI enables advisers to produce a level of analysis in minutes that would normally take a couple of days – including all the holding analysis, rebalancing options and creation of a client-friendly presentation.
This can deliver what I’ve repeatedly been asked for by C-level executives at large advisers – the ability to replace most of their paraplanners with automated systems.
Many advisers I have spoken to recently are excited by the prospect of AI but frustrated that practical solutions are not yet appearing.
Based on what I saw at Future Proof, these now exist in the US. However, because of the higher consumer protection requirements of our regulatory structure, it is unlikely many of the leading-edge US services will want to come to the UK. Our advice community is only around 10% of the size of the US. It would require too much development for too little reward.
A UK presence does offer a great opportunity for advice tech firms working to build global solutions, though. If you can meet Financial Conduct Authority standards, you can roll out pretty much anywhere.
Meanwhile, UK advice tech firms can learn a lot from their American peers.
Ian McKenna is founder of FTRC. Videos explaining the above and many other systems featured at Future Proof can be found here.
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