By now, you’ve likely already encountered countless headlines proclaiming how Artificial Intelligence (AI) is poised to revolutionise our lives.

If you were to judge the future based on Nvidia’s soaring market capitalization, you might wonder whether AI is truly the next big revolution or just a speculative bubble waiting to burst. The flood of news, ranging from fears of massive job losses to claims of overhyped promises, seems endless.

So, I hope you’ll forgive me for adding my perspective in this article to the burgeoning choir of voices.

In my view, the conversation focuses too much on the “Artificial” and not enough on the “Intelligence” when discussing AI. Any tool, platform, or technology that enables better decision-making, enhances efficiency, mitigates risks, and fosters greater intelligence is worth embracing. From serving as digital assistants to acting as co-pilots in managing complex systems, AI-powered business models will drive the industry forward. And it goes far beyond just content creation or the capabilities of ChatGPT

While there will undoubtedly be benefits from automating and customising client content through AI, there are other benefits to leverage and help improve our efforts, not only achieving better client experiences, but in our overall financial decision making.

  1. IMPROVED CUSTOMISED RECOMMENDATIONS USING INTERACTIVE ANALYTICS – we can use the power of AI to gain intelligent insights into how best to construct client portfolios and monitor how they are performing.  For instance, with investment advisers, AI will enhance your data analysis, using algorithms and crunching millions of numbers, to allow you to design and monitor fully customised investment portfolios that align with your client’s financial goals.  AI can leverage vast amounts of data to provide tailored investment recommendations. By analysing factors such as income, expenses, savings, and investment horizon, an AI-powered adviser firm could fine-tune the personalised investment plans that achieves a client’s unique background and objectives.
  2. PROACTIVE PORTFOLIO REVIEWS AND MAINTENANCE THROUGH PORTFOLIO HEALTH CHECKS – Just as preventative healthcare emphasises the importance of proactive measures to maintain well-being, the realm of investment portfolios benefits immensely from automated health checks, carried out by artificial intelligence (AI). This approach allows investors to address potential issues before they escalate.  Traditionally, risk management involved laboriously collecting data, manually entering it into cumbersome Excel spreadsheets, often littered with formula errors, and analysing it for potential pitfalls. This process was time-consuming, prone to human errors, and often hindered by data quality issues.  Automated health checks leverage a moving window of data, offering a dynamic and real-time evaluation of the portfolio’s condition.
  3. PORTFOLIO MONITORING WITH RISK ALERTING – AI can keep a continual eye on investment portfolios, monitoring market trends, and making adjustments, in real-time. It can analyse market data, news, and economic indicators to provide proactive alerts and recommendations. It’s like having a financial watchdog that never sleeps, guarding your investments with unwavering vigilance.  One of the advantages of automated health checks is the ability to provide real-time notifications to investors. These notifications, often delivered through user-friendly apps leveraging interactions with large language models, explain why a portfolio may be deemed unhealthy and can even suggest remedial actions. Whether it’s a significant deviation from historical patterns, unexpected drifts in holdings that require a rebalance, or heightened risk levels requiring an urgent change in portfolio shape, investors are promptly informed and equipped with actionable insights to safeguard their portfolios.

These aspects are but a few ways AI can help improve investment decision making, reduce manual work and improve efficiency.

But we should not fear AI.  While it can help provide efficient and personalised investment intelligence, it can never replace the human touch that comes with empathy, intuition, and experience. For instance, the integration of AI in the financial advice industry can free up advisers from routine tasks, allowing them to focus on building deeper relationships with clients, understanding their unique needs, and providing holistic financial planning.

Instead of joining the chorus extolling the virtues of Artificial Intelligence, we encourage a shift in perspective – think of it as “Augmented Intelligence”. This approach emphasises the synergy between humans and AI, where technology amplifies human intelligence, particularly in problem-solving. By offering recommendations and insights based on deep data analysis across various scenarios, AI doesn’t replace the human element; it enhances our capabilities and strengthens our efforts. This view aligns with our core belief that the human factor should always remain central, you are the Director, with technology serving as a powerful enabler.

Article featured in Money Marketing, 2 October 2024

Three ways AI will influence financial decision making (moneymarketing.co.uk)