Taking Financial Advice to the Next Level with AI
A deep dive into the world of AI-powered financial advice and explore how it is taking the industry to the next level. Will AI change the way you think about money in the future?
Today, AI and Machine Learning can give you advice on practically everything under the Sun. Chat GPT and many other AI-based platforms are capable of giving you advice on topics ranging from business to personal relationships. It would only be natural for AI to enter the world of financial advice and wealth management.
In recent years, financial technology (fintech) has revolutionized the way we handle our finances, we have stepped towards making mobile banking and online investment management a norm. One of the most significant advancements in this field is the emergence of robo-advisors, digital platforms that offer automated, algorithm-driven investment services. Tech jargon aside, the idea behind robo-advisors is simple: using advanced algorithms, they analyze an individual's financial situation, risk tolerance, and investment goals, and then create a customized investment portfolio that aligns with those factors. The world of investing and saving money has been greatly impacted by these new platforms, which are changing the way we think about wealth management.
Are Human Financial Advisors Being Replaced?
Robo-advisors are now considered a viable alternative to traditional financial advisors, offering low-cost, accessible, and convenient investment options for individuals. They have made it easier for people to invest their money, regardless of their experience or financial background. It’s simpler to explain robo-advisors as being similar to targeted advertisements that respond to your personal preferences but for investment. With their automated processes and low fees, robo-advisors are quickly gaining popularity among millennials and the tech-savvy, who are looking for affordable and accessible investment options. Some online platforms are almost truly AI-managed and provide AI investing solutions to banks as well.
While the future may be seemingly bleak for financial advisors, the role of AI is not entirely geared towards replacing the human touch in financial advice but instead amplifying it towards accuracy and automation. AI can, and is, being used to not only complement the financial advisor’s job but also to offload mundane tasks and free up their time to provide tailored advice to prospective and existing clients.
Is It Worth It?
AI-powered platforms can provide a more comprehensive wealth management service which offers personalised guidance, high-end portfolio analytics and access to a greater selection of financial products and markets.
AI-driven financial advice is beneficial in 3 key ways:
It offers a more personalised and tailored service (as compared with robo-advisers) by considering all of the individual's goals and financial information.
It also allows for more accurate and comprehensive portfolio creation, taking into account market conditions and risk tolerance
The cost associated with AI-driven financial advice is generally low as it is automated and the majority of the process is completed by algorithms.
When Can I Start?
Truth be told, most brokers, even the big names, have already started to use AI to some extent in their portfolio management tools available on their apps (graph below). There’s a good chance you have already been given AI-based portfolio restructuring or stock advice in the past. This trend will continue to increase and switching brokers will not be necessary as they are all competing on building the latest and cheapest systems for their users. Nevertheless, scouting the internet for pure AI investment solutions is not difficult and the options available cover cryptocurrency, stocks, and bonds.
Ultimately, the decision is up to you. If you are comfortable making all financial decisions on your own, then AI may not be necessary today. However, if you are willing to test and pay for an AI-powered platform that can offer more comprehensive and personalised advice. It would however be beneficial to diversify yourself and explore these new possibilities in the coming era of AI.
“We’re witnessing the creative destruction of financial services, rearranging itself around the consumer. Who does this in the most relevant, exciting way using data and digital, wins!”
– Arvind Sankaran
Interesting read! I think AI fin advice won’t work because of the lack of real accountability. What do you think?