So what do you see when you think of an Independent Financial Adviser (IFA) or Financial Planner? Chances are you probably have an image of a swank, middle aged man in a sharp suit with slightly greying hair, who can find his way around a cash flow model, and who has a fondness for writing the occasional blog (ahem)
But might this wonderful caricature be on its way out, to be replaced by a digital chatbot with a brain the size of a planet powered by
artificial intelligence (AI)?
Well maybe…
The Problem with Human Financial Advisers
The big problem with advice is that you’ve got to pay for it, and for many, it’s not affordable. Not just that, finding an adviser is becoming challenging as there are fewer of us today (I’m not going to say ‘fewer good ones’ – but there, I just did!).
Back in
2010/11, there were more than 40,000 IFA’s operating in the UK. Today, there are around 25,000 - some would call that a good result. This means that even if you can afford to pay for one, finding one is becoming increasingly difficult.
Even the choices on the wonderful Isle of Man are becoming fewer. Several businesses have not renewed their licenses and have stopped offering financial assistance, thereby limiting options for where to obtain financial advice.
These two factors are what’s commonly known as the ‘advice gap’.
Today, some of these issues are beginning to be addressed. For example, automated chatbots on banking and financial websites that ask, ‘How can we help?’ – but the thinking is that this could go a great deal further.
Examples of AI in Finance: MyEva & Multiply
Two “AI in Finance” platforms that have caught my eye recently have been MyEva and Multiply.
MyEva is an AI financial adviser chatbot called Eva (female, obviously). After you complete an online financial fact find (or health check as they call it), MyEva will suggest ways for you to achieve your financial goals.
If users meet certain criteria, such as being debt-free and having cash savings, they can access investment advice — but only after having their risk appetite and capacity for loss assessed. MyEva will then recommend funds from its limited portfolio – offering suggestions it considers are appropriate for its target market of first-time investors.
Complex financial planning can still be put through to a human adviser to help back up the AI system. At present, MyEva is popular among employers that purchase it for their employees as a benefit. However, it is also available via a very small monthly subscription.
The second AI tech that has caught my eye is by
Multiply. Multiply provides a slightly different approach, which is through their app. My impression is that this is for younger clients, perhaps in the early stages of their
accumulation phase.
The app takes lots of basic information which it then turns into basic advice. In addition to savings tips, Multiply offers Individual Savings Accounts (ISAs), Self-Invested Personal Pension (SIPPS) and general investment accounts, as well as recommendations of portfolios comprised of several funds. Multiply also offers protection products (which MyEva doesn’t).
Conclusion
I think Artificial Intelligence (AI) can play an important role in bridging the advice gap - as long as it is overseen by humans. For sophisticated advice, I’m always going to favour a human, but that may not always be the case. Rather than fear the change that AI could bring, there is growing consensus that we should embrace the technology for what it may provide.
Unless it’s called Skynet – but that’s an altogether different discussion.
Main keywords: AI, Artificial Intelligence, Finance, Financial Planning