By Jayson Forrest
The rise of artificial intelligence (AI) and its implications for financial advice has some advisers worried and others excited. Glenn Calder (Viridian Financial Group) and James Wartho (Fifth Logic and FinTalkr) share their views on how AI will shape the future of financial advice.
When we hear the term artificial intelligence (AI), thoughts quickly turn to self-driving cars, autonomous robots, chatbots, and artificially created artwork. But believe it or not, AI machine learning isn’t something that’s new, having been around since the 1950s when it was defined as a machine’s ability to perform a task that would have previously required human intelligence.
Fast forward 70 years, and AI has firmly become entrenched as the science of making machines think like humans, by performing tasks that are considered intelligent. AI technology can process large amounts of data in ways that humans are unable to, with the goal of being able to do things such as recognise patterns, make decisions, and judge like humans.
Not surprisingly, the ability for AI to beneficially impact the financial advice environment is enormous, says James Wartho — Chief Executive Officer at Fifth Logic and FinTalkr.
As part of a webinar discussion about ‘What is AI: An explanation of artificial intelligence and its uses’ — which was part of an IMAP Specialist Webinar Series on ‘AI and its impact on advice, portfolio management, and investment management’ — James says AI can and will “do many great things in financial advice”. However, he believes AI will not replace advisers anytime soon, but rather, be used to increase their ability to service clients more efficiently, while allowing more consumers to access advice.
“We have a saying at Fifth Logic that the ‘A’ in ‘artificial intelligence’ should instead stand for ‘augmented intelligence’. We can use AI to augment the work that financial advisers do, which will make the financial advice process more compliant, efficient and faster in which to operate.”
As Joint Chief Executive Officer and Executive Director at Viridian Financial Group, Glenn Calder CFP® is an advocate of AI, believing it to be one of the biggest opportunities available for the financial advice industry.
“We can’t deny that successive waves of innovation, like the combustion engine and internet, fundamentally changed our lives and the way we do business. Just consider how expensive the internet was when we first started using it, but now it’s widely accessible, affordable and easy to use for everybody. We can expect a similar path with AI,” he says.
“AI is part of the next wave of innovation. It’s already extremely accessible and its reliability is improving each day. You only have to type in the word ‘Gemini’ in your browser to get Google’s version of AI, making it readily available and affordable to consumers.”
Glenn believes AI will supercharge advice, enabling advisers to become more efficient, while allowing them to service more clients. He says AI will commoditise various aspects of the advice process, like SOAs and research. These tasks will no longer take weeks or months to produce but instead, only minutes to complete, allowing advisers to spend more time with their clients face-to-face.
“AI will undoubtedly have a significant impact on the advice industry and it’s something we should embrace. As an industry, we need to get ahead of AI, we need to invest in it, we need to promote our people into it and equip them with the right tools to excel with AI. As an industry, that will set us up for the next generation of advisers and clients.”
Glenn Calder CFP® - Viridian Financial Group
James Wartho - Fifth Logic & FinTalkr
Mike Taylor - Financial Newswire.
We’ve been using AI in our compliance for a number of years but in terms of the advice process, I feel we’re just at the start of our own journey. AI will be the next evolutionary leap for advice. It will increase the number of clients per adviser and the number of client-facing people in our industry. So, I believe AI is well worth the investment and time to implement
We have a saying at Fifth Logic that the ‘A’ in ‘artificial intelligence’ should instead stand for ‘augmented intelligence’. We can use AI to augment the work that financial advisers do, which will make the financial advice process more compliant, efficient and faster in which to operate
The beginning of the journey
Despite the ability of AI to deliver greater business efficiency, Glenn concedes the Australian advice industry is only at the beginning of its journey with AI. In a post Hayne Royal Commission environment, he believes many advisers and advice businesses are still cautious, particularly in relation to data security and their fiduciary duty, which is considerably higher than many other industries.
“We’ve been using AI in our compliance for a number of years but in terms of the advice process, I feel we’re just at the start of our own journey. AI will be the next evolutionary leap for advice. It will increase the number of clients per adviser and the number of client-facing people in our industry. So, I believe AI is well worth the investment and time to implement.”
It’s a view supported by James, who says the opportunities to use AI in wealth management and financial advice are still being conceived.
“Our application, FinTalkr — a conversational AI-driven platform to help advisers increase their productivity, while providing them with more time to spend with clients — performs a range of functions within the advice process. But with all the possible capabilities that AI can provide, we’re still only just scratching the surface. So, the plans we have to enhance FinTalkr over the next couple of years are very exciting.”
Most of the CEOs James talks to are only at the beginning of their AI journey. They are thinking about how to use AI and the implications this will have on their business. And while some of these advice firms are already running technology trials internally, in terms of packaging up some of the capabilities of AI into an application that is safe, secure and encrypted, with data domiciled in Australia, James believes most local advice businesses are only at the very beginning of this process.
AI will undoubtedly have a significant impact on the advice industry and it’s something we should embrace. As an industry, we need to get ahead of AI, we need to invest in it, we need to promote our people into it and equip them with the right tools to excel with AI. As an industry, that will set us up for the next generation of advisers and clients
The benefits to clients
Whilst the benefits of using AI are evident to advice businesses through the likes of improved efficiency and the ability to service more clients, AI also provides clear benefits to the end-user of advice — consumers.
According to James, over the last five years, the cost of financial advice has risen by 40 per cent, primarily due to compliance and record-keeping requirements for advisers. He adds that the number of Australians receiving financial advice has dropped to 10 per cent, making the need for advice critical, given Australia’s ageing population.
The question concerning AI, says James, is how it can address the issue of under-advised Australians and make advice more accessible and cheaper for them.
“Advisers using FinTalkr are reporting productivity gains of 4-8 hours every week. These gains can flow through to reduced costs and the ability to service more clients. Ultimately, productivity gains by using AI will enable more Australians to access an adviser.”
Glenn agrees that along with greater accessibility to advice — by freeing up advisers to see more clients — there will be considerable cost benefits of using AI, which will help deliver a more affordable advice offering to consumers. He also envisages AI being used to triage clients, allowing advisers to deliver different levels of advice to people, ranging from standard through to highly specialised advice, depending on their needs and circumstances.
“When you consider all the people involved in advice who may touch a client’s file — from an adviser, through to a client services manager, paraplanner, and a compliance officer — there are multiple people involved in the advice chain,” says Glenn.
“However, some of these roles may become more client-facing, as AI will effectively remove many labour-intensive administrative and back-office functions, like data analytics. That will help to make businesses more profitable, which should assist in reducing some of the costs of advice. I expect AI will make advice more affordable to Australians, with the ability for advisers to see more clients face-to-face. AI is such a worthy goal to invest in. We need to train and encourage our people through it.”
I think AI can make the work of advisers easier, by either removing entirely or decreasing the amount of administration and back-office work they currently do. This will allow advisers to spend more face-to-face time seeing clients. So, let’s get AI to do all the boring work, and let advisers get on with the job of improving the financial lives of Australians
The future of AI
James acknowledges that the AI industry is developing rapidly. It’s enabling advisers to take large language models (LLMs) to build AI powered applications and platforms. LLMs, like ChatGPT, is a type of AI algorithm that uses deep learning techniques and massively large data sets to understand, summarise, generate and predict new content.
Looking ahead, James believes LLMs will be commoditised, making them cheaper to operate.
“I expect LLMs to become ubiquitous in many industries. I believe the benefit and value will be on the ‘use cases’ (a technique or methodology used for capturing, modelling, and specifying the requirements of a system) that will be build on top of this version of AI. That will make AI incredibly more efficient for the advice industry, resulting in much greater levels of efficiency for advisers who adopt AI.”
And what about evolving advice models? Looking ahead, is there an opportunity for clients to receive regulated and compliant advice without human contact, and would the scaleability and accessibility of this type of advice model be most affective for the majority of Australians?
“It’s an interesting question,” says Glenn. “We may see this advice model potentially develop but certainly not in the near-term, unless it’s a very limited query, like: ‘What are the superannuation contribution limits?’”
As an example, Glenn points to Dr Google, which has been operating for the last 25 years. Despite the popularity of this application, doctors haven’t gone out of business and people haven’t stopped seeing medical practitioners. Instead, people use this application to research their symptoms and then decide whether to see a doctor or not.
“Equally, while AI can deliver more generic information, like superannuation contribution limits, it can’t yet provide detailed advice or strategies that a human adviser can deliver. That’s because an adviser will conduct a deep dive into an individual’s circumstances, their goals and aspirations. I can’t see AI having the ability to do that anytime soon. Consumers still want to talk to a professional, that’s why I believe AI will become a tool that enhances the work of advisers.”
James agrees, adding that the profession needs more, not less, financial advisers in Australia.
“I think AI can make the work of advisers easier, by either removing entirely or decreasing the amount of administration and back-office work they currently do. This will allow advisers to spend more face-to-face time seeing clients. So, let’s get AI to do all the boring work, and let advisers get on with the job of improving the financial lives of Australians.”
About
Glenn Calder CFP® is Joint Chief Executive Officer and Executive Director at Viridian Financial Group; and
James Wartho is Chief Executive Officer at Fifth Logic and FinTalkr.
They spoke on ‘What is AI: An explanation of artificial intelligence and its uses’ as part of an IMAP Specialist Webinar Series on ‘AI and its impact on advice, portfolio management, and investment management’.
The session was moderated by Mike Taylor — Managing Editor at Financial Newswire.
