The importance of a personal touch in an increasingly digital world

3 minute read

The artificial intelligence (AI) revolution is in full swing with this potentially transformative technology interacting with an ever-growing range of topics and industries. However, while we recognise the potential benefits that this could bring to wealth management, we remain guarded against potential risks and believe that the human role is now, arguably, more important than ever.

Almost half of global consumers are using AI to help inform their savings and investment decisions, according to a survey by consultancy EY¹. 49% of respondents claimed to have used AI to support decisions in the last six months and 37% said they would find AI “very” or “extremely” helpful in providing personalised financial advice or automating financial decisions. The UK’s Financial Conduct Authority has recognised some of the risks involved and launched a review to assess the repercussions for investors from evolving AI services.

The importance of critical judgement

While the potential benefits of AI are welcome, it is also important to maintain critical judgement and not to confuse ease of use with optimal outcomes. Take large language models (LLMs). These have enjoyed a rapid rise of users in recent years and, while they can provide useful information and insight, they can be prone to error.

This inaccuracy may not seem so important when asking for design ideas for home renovations or what England’s starting XI should be at the upcoming football world cup. However, when it comes to personal finances, reliability is crucial. Not only will responses be potentially inaccurate, but solutions given may prove suboptimal through no fault of the AI. A further issue is that the data the most popular (and often free) models are built on is not always current or accurate. So, while the models can write with great authority, referencing sources, the advice or conclusions provided can turn out to be, what are known as, hallucinations.

A key skill of any investment manager and financial planner is listening. It is important not just to hear what a client is saying but to ask the right questions and gain a true and meaningful understanding of their circumstances. Clients, however, may be wary of providing as much information to an AI model as they are to a wealth manager. If so, the wealth manager is likely to make better informed judgments. Moreover, it is worth bearing in mind that wealth managers are regulated, meaning that there is legal recourse in the unlikely event something goes wrong. As of yet, legal challenging against AI is a grey area without much precedent.

There is little doubting that AI can be a powerful tool. But for the best outcomes it should be used properly. Trusted, experienced financial professionals can help take a more holistic approach to financial planning and investment management, leading to better decision making and, ultimately, better client outcomes.

On the one hand, it is clearly a welcome development if more people are taking a proactive approach to managing their finances. AI tools can be a great enabler of this.

However, users should be fully aware of the potential pitfalls that over reliance could bring. For instance, LLMs can do a fantastic job of summarising rules and calculations, but they are somewhat more limited in using that information to build holistic financial plans, specifically tailored for their personal goals and objectives. After all, reaching these targets is often the ultimate aim of saving and investing.

[1] Consumers turn to AI for investment decisions