AI and financial advice: current and future use cases

31 January 2023

AI is increasingly being embraced by the UK financial adviser community, with 70% viewing the technology as an opportunity rather than a threat. Nearly three-quarters of advisers anticipate incorporating some form of AI into their advice process within the next five years*. But how is AI currently being utilised? And what does the future hold? To shed light on these questions and provide insights from an advisory firm already leveraging AI, we invited Dr Aalok Shukla of Implement AI and Tom Ham of advisory firm Calton Wealth to a panel discussion at the recent Schroders Adviser forum. Here’s a glimpse of the topics discussed.

What is the current state of AI application in UK financial advice and what does the future look like?
Aalok Shukla: “The speed and power of AI are astonishing. It's challenging for us to grasp an exponential curve, but with AI, we're at the point where we're leaving the baseline and starting to ascend steeply, akin to an elevator. The transformation will be dramatic. For businesses that can utilise AI to restructure their cost base, the benefits will be substantial.”

In practical terms, how does AI assist in the financial advice process currently?
Aalok Shukla: “A real-time AI voice tool is a potent method to capture client data and build an augmented customer record. It's like having the AI ask a series of questions to quickly gain insight about a person in an engaging way.

“Another less obvious use is to have AI ‘participate’ in adviser interactions with clients. The AI tool could listen to clients’ responses and suggest follow-up questions that would appear on the adviser’s screen. This method is already being used in doctors’ consultations with patients, where the AI listens to symptoms and descriptions and suggests the next question.”

Calton Wealth is a case study of early AI adoption. How is it being utilised so far?
Tom Ham: “We’ve been integrating about 12 tech platforms that we use across the financial planning process into one unified system – part of that includes an AI system with a range of potential applications.
“At present, my aim is to use AI to enhance adviser-client interactions. I believe that if you use AI to replace too much of the value chain too quickly, it's like turkeys voting for Christmas. I'm looking to solve the problem of daily admin and low-value tasks. This would free us up to focus on the client and client interactions.

“At the moment we’re using the report-writing function. We already had an efficient report process, down to about an hour. The AI element can reduce this further to about 15 minutes, with me simply reviewing the prepared documents, knowing which parts to check as I can go straight to the sections that have been modified.”

“With the next phase of the AI rollout, I’ll be able to meet a client, make notes, and take pictures of pension statements and other documents. I can then drag all that onto our system and get it to populate the fact-find for me. From there, it can generate letters of authority, further questionnaires, or other texts in the recommendation and suitability process.“

What other tasks might AI be performing for your business in the future?
Tom Ham: “The current implementation is already driving a lot of efficiency in the firm. But there are more tasks that we can delegate to the AI, once we’ve fully integrated it into our other systems. Complex tax calculations, for example, would be one application.”

What about the concern many financial advisers have: “will this replace my job?”
Tom Ham: “This is where I have some reservations about AI voice calls direct to clients, at least at this stage. I'm not convinced that clients will be entirely comfortable with it.

“I think younger demographics will undoubtedly embrace it. But we're a boutique business that deals with a lot of people aged 50-plus, as do most firms in this industry. A significant portion of this demographic may not be comfortable talking to an AI or may have data concerns. So again, for us, it’s about using AI to free up resources, so advisers are doing the engaging tasks.

“There is no reason that advisers need to be writing a report for a simple ISA switch or pension switch, the AI can do that. But advisers can be discussing retirement modelling, for example, dealing with clients face-to-face. Overall, the purpose for now is for AI to redistribute as much of our efforts as possible onto the client-facing functions, so we can make clients feel cherished.”

Aalok Shukla: “The key thing here is you want to augment your team. Once people have a clear vision of what’s possible and that no one's losing their job, they will become more empowered. And then they can embrace some of the training opportunities: learning from other colleagues’ client consultations, for example, or benchmarking consultations. There are a lot of analytics.

“User interfaces are also changing. Today you might be asking clients to fill out a form on the website. But it could be easier for that person to talk to it. It's not about necessarily replacing the consultation; it's just about smoothing the data collection. The more interactive your customer experience, the more capacity is unlocked along with speed and consistency of service.”

One of the major concerns associated with AI is data security. How is this being addressed?
Tom Ham: “Ensuring robust security is crucial before I would even consider putting client data anywhere near it. In simple terms, our system involves two stages of encryption, and by the time the AI is preparing my report, it's just matching anonymised entries not connected to any underlying client. The data is decrypted as a separate stage. I use the analogy of the Enigma code in World War Two – you need the right key to unlock it.

“It was a significant undertaking: we spent a lot of time with our compliance team to ensure that we were OK to start distributing data to these tools.”

Aalok Shukla: “There are already comprehensive underlying data regulations. And then there are professional and regulatory obligations. There is a lot of protection already in place for clients.”

Tom Ham: “The regulator is interested in this, and the protections around this and the way the data is used and stored. We've spoken to clients about it also, and some are impressed and completely fine with it. But there was one who was very much: ‘I don't like this’. They may have watched a lot of Terminator films – but they requested that the work on their planning be undertaken manually.”

What other benefits might AI bring to the broader business of financial planning?
Tom Ham: “I'm not fond of the phrase, but I think we will see solutions here for the lower value client proposition. I enjoy solving the big, complex technical problems for clients; but I also feel passionate that we should find a way of widening the scope of access to advice. We’re not there yet, but AI is likely to be a significant part of that.”

Aalok Shukla: “I think the next 24 to 36 months will be significant in terms of change with some clear winners emerging. At present, many industries are mature with fixed cost structures. What AI offers is an opportunity to redistribute those costs and structures across a business. And the ones that adapt first are likely to be more agile and efficient.”

*Source: Schroders Adviser Survey, November 2023

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