Scroll

Why we need humans, not AI, in financial planning

Read more
Last updated: April 16, 2024

Would you take financial advice from a robot? Would you follow its instructions on how to invest your money or create a retirement plan? I’d hazard a guess to say probably not. 

And that is exactly why the human touch is still important when it comes to financial planning. It boils down to trust and connection, which are both difficult to achieve when interacting with a machine. 

AI has been a buzzword, not just in the financial planning sector, but throughout industry. The ability to product content at speed, with advanced capability is enticing and, at Stephen Eve, we are not ignorant to the fact that embracing AI can build business efficiencies and potentially reduce the cost for the client. But, would the service you receive remain high-quality?  

What is AI?

It may be prudent here to explain what AI actually is. IBM (a multinational technology company) defines AI as ‘technology that enables computers and machines to simulate human intelligence and problem-solving capabilities.’  

ChatGPT is a form of generative AI that helps with content creation and information retrieval. It analyses a wide range of data – including news articles, social media posts and financial statements. 

Some of AI-driven financial tools include: 

  • Automated budgeting and expense tracking 
  • Investment platforms for smart investing
  • Personalised financial planning tailored to your goals 
  • Debt management strategies
  • Improving financial literacy 

How effective is AI in financial planning?

It can be a great, often free or low-cost tool to assist in making financial decisions but does need to be combined with a financially trained mind to make profitable choices. 

While these advancements make money management more convenient and accessible, the advice they offer — if any — is often generic. After all, they effectively trawl the internet and databases, picking up on patterns, and relaying information to the user. AI can analyse vast quantities of data, but it’s not going to provide you with specific investment recommendations. Certain aspects of your financial life still require a more nuanced approach and human judgement.  

The danger with AI lies in the fact that it is only as accurate as the information you put into it. It can’t ask thoughtful follow-up questions to enhance answers, unlike a financial planner or adviser. When AI models are fine-tuned, they get closer to representing human financial advice but, the issue is, how do you fine-tune them?  

It takes specific, technological knowledge, something many of us are not familiar with. It also takes time, which is scarce for many people and often a reason they employ a financial adviser: to take a weight off their shoulders and give them back precious hours.  

The University of Portsmouth cites a few limitations of AI in financial planning: 

  • It can lead to responses that lack depth and insight.
  • There is also a need for greater transparency about how these tools make decisions. For an investor to leave their portfolio in the hands of one of these “robots”, they would need to be able to understand how, for example, it reaches its conclusions and what data it uses. 
  • The potential for bias in the recommendations of these tools must also be considered. 
  • The accuracy and reliability of ChatGPT’s predictions need careful evaluation given recent reports that it has repeated disinformation. 

The Financial Times Adviser also explains ‘Although AI may be able to process quantitative data and generate tailored investment portfolios, it may fall short in addressing the qualitative aspects of financial planning... it has yet to fully capture the essence of personal conversations between clients and advisers. These conversations often involve tone, context and body language that AI currently struggles to interpret.' 

Will Stephen Eve use AI?

We are yet to embrace AI at Stephen Eve - as the saying goes: ‘If it’s not broken, don’t fix it’. We find that our personal, bespoke approach works for clients so for the moment, it is staying that way. However, we are no strangers to the fact that the world moves, and innovation is vital so as not to get left behind. AI can play an effective part in financial planning when combined with human financial advice. 

The client-facing of the job is still our favourite element. Meeting with people, understanding their lifestyle, beliefs, goals, concerns then providing a financial solution is arguably the most important part, too. It is where we receive feedback from clients that the service has been valuable to them.  

However, there is a multitude of work that goes on behind the scenes to implement the financial solution. The financial planner creates the plan, then administrative tasks and specialised reports must be completed to implement it. This is where AI could be useful, allowing the team to speed up manual work so that more time can be spent with the client. More time spent communicating, acknowledging, connecting and less spent behind a screen. That said, the technology is not quite there yet so while we are willing to move with the times, Stephen Eve won’t make any changes until we are confident that we can continue to deliver a best-in-class service. 

All this to say, AI is not something to ignore, and we will certainly be keeping an eye on its progression, but it isn’t a tool we believe can replace a human adviser. It may be able to enhance our offering but, until developers create a solution that we believe is best-in-class, we will stick to the approach that works for us.  

menucross-circlearrow-down-circlearrow-right-circle