Article How will AI impact financial advice?

The impact of artificial intelligence (AI) in financial advice isn’t solely a subject for future speculation – its effects are already being felt. Many advice firms are already using the technology to enhance various aspects of their services as they look to achieve better outcomes for their clients.

In a recent speech, Jessica Rusu, chief data, information and intelligence officer at the FCA, outlined the FCA’s commitment to fostering AI innovation in the industry, and its ‘potential to transform financial services’. And, according to Rusu, ‘we’re at a key point in the adoption of AI and dramatic technological change.’¹ 

In this article, you’ll find out how AI is being used by financial advisers, the opportunities it brings and how it could shape the way you work in the future.

The context of AI in financial advice today

According to a 2024 Bank of England and FCA survey, 75% of financial services firms are already using AI, with a further 10% planning to use AI over the following three years.² 

AI simulates human intelligence in computers by programming them to ‘think’, learn, and improve their ability to perform tasks. It’s driving customer recommendations in eCommerce, and enhancing customer service chatbots. The technology is well suited to tasks that require the speedy processing of large volumes of data – and detecting patterns within it. Not only could it improve operational efficiencies, but provide customers with personalised services, too.

With this in mind, the FCA has recently launched a review into how AI could reshape the industry – potentially changing consumer behaviour, and disrupting today's business models. The regulator sees potential for AI to boost personalisation, drive efficiency and cut costs – ultimately driving better outcomes for clients.

But, through this review, the FCA also recognises that with this potential for opportunity also comes risk³ – both of which we'll explore further below.

4 uses of AI in the financial advice industry

While the technology and its uses are rapidly evolving, AI could already make an impact in the financial advice sector. Here are some examples of how it could be used within your business:

1.  Speed and efficiency

AI can complete tasks in seconds that could take hours to do. For example, gathering information, comparing products or generating reports. This has the potential to release you from administrative tasks so you can spend more time working and chatting with your clients.

2.  Data insights

Because of its ability to observe patterns in vast datasets, AI can find insights that could help you to make informed decisions and support you in shaping your investment forecasts. By combining AI’s number crunching abilities with your own knowledge of the data, economic landscape and client needs, it could help to fine-tune your forecasting. 

3.  Communication

Customer experiences could be improved with AI. It can tailor newsletters, sales pitches and other literature to clients’ needs or to help you win new business. However, while it can help with communication directly, perhaps the biggest impact in this area will be to free up time for you to focus on your own communication.

4.  Fraud detection

According to the Bank of England and the FCA’s report, some of the highest benefits of utilising AI in financial services is to combat fraud and reinforce cybersecurity. AI can spot unusual patterns in data that may indicate potential fraud, helping firms act quickly before issues escalate for themselves, and customers.

What will an AI future look like for financial advisers?

The integration of AI in financial advice is indicating a new era in the industry, but its outcomes might not benefit everyone. As the technology becomes more established, it’s likely to bring new opportunities, but potential risk, too – both of which are important to be aware of.

AI and Consumer Duty

AI could help you achieve good outcomes for your clients in compliance with the Consumer Duty principles. This is because its data processing and potential trend forecasting capabilities might improve your ability to understand and support your clients.

AI and financial wellbeing

Using AI for time efficiency could further consider the financial wellbeing of your clients, too. Spending less time on numbers and data sets, and using AI’s potential to help with forecasting, may allow you to focus on the human side of your client’s life plan, instead. This may allow you to put your client’s needs, purpose and financial wellbeing at the forefront.

For more information on this, check our article on the impact of AI on your client’s financial wellbeing.

A human touch will remain key

AI lacks one crucial ingredient: humanity. AI is unlikely to be sensitive to a client’s wellbeing and discuss matters with them sympathetically, especially in a way that clients trust. It can’t pick up on nuances such as body language and tone of voice that require real life interaction.

In this case, your strong client relationships and wealth of experience will remain hugely important factors in the overall advice offering for clients.

AI could make scams more sophisticated

When it comes to scams and fraud, AI presents a double-edged sword. While it can help you with fraud detection, it’s could also increase the complexity and sophistication of fraud and scams. For instance, AI can generate human voices, videos and images that could put your clients at risk.

A collaborative approach could lead to an exciting future

AI presents you with opportunities to offer greater value to your clients. It can streamline operations, help you comply with Consumer Duty principles, and be a powerful research tool. However, it’s still a tool that organisations, customers and advisers must experiment with to find its most effective application.

Caution is required as the technology is still in its infancy. Like any transition, the move to AI is best achieved with careful consideration and planning. But the progress of AI doesn’t need to be concerning. Embracing a collaborative approach could benefit your business and your clients.

Despite its potential, AI can never fully replace the years of expertise, relationship building and human touch that advisers bring to the table. While it might be beneficial in supporting your financial planning, your unique approach, knowledge and soft skills is something it can’t replicate.

By combining your own strengths with AI’s capabilities, you could enjoy the best of both worlds and more effectively support the needs of your clients.