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Will Artificial Intelligence replace financial advisers?

As technology advances, many industries are being disrupted by new and innovative solutions.

Wednesday, January 11th 2023, 6:23AM 12 Comments

Artificial Intelligence (AI) technology is being adopted in many industries in New Zealand, including healthcare, finance, agriculture, and transportation. AI is being used in New Zealand to improve the agricultural sector's efficiency, develop new financial products and services, and provide better healthcare to patients. AI is also being used in New Zealand to help improve the accuracy and speed of decision-making in various industries and automate many routine tasks.

As AI technology advances, we will likely see even more widespread adoption of AI in New Zealand and other countries worldwide.

One example of a New Zealand company using AI is Fonterra, the world's largest dairy exporter. Fonterra is using AI to improve the efficiency of its dairy farming operations. The company is trailing an AI-powered platform that uses sensors and machine learning algorithms to monitor the health and productivity of cows. The system collects data on factors such as a cow's activity levels, eating habits, and milk production and uses this information to optimise the cow’s health and diet. This has the potential to help Fonterra to increase the efficiency of its dairy farming operations, reduce costs, and improve the quality of its products.

The financial advice sector is no exception. One recent development that has caught the attention of many is the use of large language models like ChatGPT to offer an alternative to human financial advisers.

What is ChatGPT?

ChatGPT is a cutting-edge natural language processing system developed by OpenAI which has caught the world's attention, gaining more than 1 million users in just a week. It is a type of AI system trained using deep learning algorithms and vast amounts of data. ChatGPT is designed to understand and respond to questions in human-like ways, making it well-suited for tasks such as providing simple financial advice or answering customer service inquiries.

Unlike traditional AI systems, which are often limited to a specific set of pre-defined responses, ChatGPT can generate unique, original responses to a wide range of questions. This makes it a powerful and versatile tool for many different applications.

So can AI such as ChatGPT replace us?

AI products such as ChatGPT can understand and respond to even complex questions in human-like ways, making them a genuine alternative for providing financial advice.

One of the key advantages of using AI for financial advice is its potential to provide advice in real-time. Traditional financial advice usually involves scheduling an appointment with a financial adviser who may not be available when you want them! On the other hand, an algorithm is always available to provide advice 24 hours a day, seven days a week.

Another advantage of using such services to deliver financial advice is that they can provide unbiased advice. All humans, including financial advisers, have their own biases and motivations, which may influence the advice a financial adviser gives. Conversely, AI is driven by algorithms and data to provide objective, unbiased advice.

Of course, there are some limitations that stop AI from replacing financial advisers. For one, it is not yet capable of providing advice on complex or specialised financial situations. It can also not provide the same level of personalised attention, empathy and support that a human financial adviser can. This last point is essential as financial advice is all about trust, which comes from getting to know clients and them trusting you based on your previous interactions with them.

Overall, the use of AI to provide financial advice is an exciting development that has the potential to revolutionise the way we give and receive financial advice. While it may not be suitable for all situations, it offers many benefits, including real-time advice, unbiased recommendations, and always-on availability.

As technology continues to evolve, we will likely see more and more people turning to AI and large language models for at least some aspects of financial advice.

Tags: Financial advice

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Comments from our readers

On 11 January 2023 at 9:22 pm w k said:
interesting. comparing humans with cows.

always thought we're treated as digits, but didn't expect cows.
On 12 January 2023 at 11:19 am Clive.Fernandes said:
W K - that's what you took from this article? :)
On 15 January 2023 at 9:16 am Pragmatic said:
I recall the outcry when robo-advice hit the headlines, & the claims that computers were going to replace humans. After looking deep into the conversation the conclusion was that computers would replace all the menial work such as data collection & monitoring.

Having read a bit about AI, it is easy to arrive at the same conclusion: machines will not replace talent. Of course, if your advice & price is reliant upon charging for low skilled services, then this may come under pressure as information/computers making this easier for consumers to get direct.
On 18 January 2023 at 11:09 am JPHale said:
For much of financial services, it is transactional, and thus open to being highly automated. However, there are aspects that aren't and this is where we add value as advisers.

This point is often misunderstood as sales vs advice where the transaction is valued over the content of the transaction. When applied to insurance highlights the very nuanced reality of the situation and where we get art vs science comments from.

The continued application of science to the advice industry risks the very point of advice. We can be highly automated, but there is a point where it kills what you're actually looking for. The nuanced personal touch and creative problem-solving that a machine will never quite get to.

We need more automation to remain both relevant and economically competitive, at the same time, we need to preserve what advice is about and what it delivers.

Sure, it's easy to determine that a 25-year-old with a clean driving record gets X policy for their Toyota Corolla.

It is very different when you're navigating multiple serious medical conditions across 4-5 different policy types and the determining factors are the rules of the insurance company interpreted by a human... The AI isn't going to give you that in a way the average person is going to digest it.

And that's providing the AI has access to the information to make those determinations. Something the insurers presently don't publish externally because of the commercial nature of the information.

For AI to be effective at advice across multiple products and providers and deliver the speed of transaction the article discusses, it needs to have access to a great deal more current and accessible information than we presently have access to.

And by providing that access to human advisers, we could be significantly more efficient in multi-product - multi-carrier advice than we presently are.
On 19 January 2023 at 2:01 pm Backstage said:
Good point Clive. Within 10 years time AI will be the most intelligent thing on the planet and will even appear sentient. We can kid ourselves all we like about soft skills etc. Most of the human race are underestimating its development and impact. It will give better more accurate, unbiased advice than us and will end up being a straight through process for advice to re-insurer on most occasions. All other pontification is mostly from folk who have done no research or study on this.
On 21 January 2023 at 12:58 pm w k said:
without a question of doubt, this AI thingy will be a powerful machine. if i were the developer, i'll make it so powerful that it'll provide the best possible solution for everyone who uses it. users don't have to bother to think .... just like the cows who are confident that the farmer will provide the best for them.
On 21 January 2023 at 1:00 pm w k said:
one more thing - newton's law states, for every action, there is an equal and opposite reaction.
On 24 January 2023 at 12:34 pm JPHale said:
@w k, yup :D
On 25 January 2023 at 10:09 am w k said:
thank you JP.

i hope the day will NOT come where AI is the only source and every one is forced to use it. and in 10years' time, consumers will be like cows, with no other choices (for better or worst), don't have to make any decisions, and the farmer (AI) controls their every movements.

that's the capability of AI. is that good and do you want that to happen? what do you think i would say if i were the developer?
On 26 January 2023 at 8:37 am Backstage said:
Well back in the 1800's when cars and trucks tractors started arriving a lot of horses were made redundant.

Technology continues. Most folk a burying their heads in the sand on this.
You can embrace or ignore, it can be a threat to your business or a toll. It is not going away.

A couple of good books for starters, Scary Smart, the future of AI and A World Without Work. The robots are coming :), it does not have to be dystopian.
On 26 January 2023 at 8:44 am Backstage said:
Actually, I wish it would be here now and working for insurers, turnaround times would be almost instant.

With all the tech we have now things have slowed down to worse than ever with processing for insurers.

This working from home BS that some insurers still allow has caused unacceptable productivity and entitled staff attitudes. With some insurers its all about star jumps and press ups and less about the core business.

Some CEO's should be hanging their heads in shame. AI can be trained to be more productive, available and responsive. On this bases, they are a threat to entitled individuals and bad leaders in our industry.
On 30 January 2023 at 3:26 am Clive.Fernandes said:
During my research to write this article, I tested ChatGPT comprehensively and can attest to its power. There will be legal and ethical considerations, and AI is not ready yet - but like it or not - it will replace a lot of work we do as advisers now.

The last four years of founding and running National Capital have shown me first-hand the power of technology. What used to take us 4 hours at a previous firm can now be done in 0.8 seconds!

Many people I speak to from different industries are of the misconception that AI will disrupt other industries - but their own is too complex for AI to handle.

I think about the thousands of variables a self-driving car needs to compute, including human behaviour and the ramifications of a misstep. Yet, self-driving cars will soon become a reality.

Question: Do we believe providing Financial Advice is more complex than driving a car?

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