Five ways AI could enhance financial services

Perhaps you’ve heard that artificial intelligence is gunning for the financial sector brandishing a scythe. We think otherwise—and not because we exist in that world. AI will augment many aspects of financial services, from back-office processes to data analysis and from customer-facing interactions to compliance, through generative, machine learning, natural language processing (NLP) and more. 

The key is enhance, not replace. AI already has begun to change the nature of client relationships with financial advisors throughout the retail and institutional spheres. When the cost of being wrong is high, humans will always want to seek help from humans. Fiduciary duty should never be outsourced to algorithms. 

Five ways AI stands to amplify the client experience in finance and asset management:

• Improved efficiency AI promises a richer experience as it automates routine processes and frees up investment practitioners to focus on higher value, strategic tasks. In the back office, AI can enable intelligent data capture through machine learning (reading handwriting, scaning forms for key data, etc.) and solve for repetitive manual processes. AI-powered chatbots and virtual assistants can provide instant responses to client inquiries and provide 24/7 support. This improves accessibility, responsiveness, and overall customer satisfaction.
• Knowledge is empowerment AI can improve investor education and enhance communication. Generative-AI searches can lead to a more informed clientele, and sophisticated institutions might even use machine learning and NLP to build their own models. The point is that prepared clients armed with potential financial solutions create elevated investment discussions. So do prepared advisors. With AI at their fingertips, advisors have ready access to answers a client might want, such as the minutiae of divorce law, taxes, estate planning, etc. The ability to avoid the dreaded, “I will get back to you on that,” would improve relationships and confidence in the advice, so long as advisors validate the answers as generative AI is not always correct (and sometimes down right hallucinates). 
• Increased personalization This might seem contradictory. But over the last decade, machine learning has contributed to models that help clients systematically define financial goals and objectives. AI models help them understand spending and saving patterns, and reveal insights around the feasibility of early retirement or other big financial goals. For advisors, predictive analytics in the front office could identify personal and market-based events triggering “money in motion” and advice opportunities. And generative AI can be used to produce personalized content from emails to newsletters, creating resonance with clients and bolstering success of marketing campaigns.
• Reduced costs and increased convenience As costs come down in financial services, especially with reduced administrative tasks, the consumer will ultimately benefit. AI-powered robo-advisors are often cited as a cost-effective solution for individual investors with straightforward needs. They are particularly attractive to younger, tech-savvy investors, but create a doorway into full-service—human—investment advisory services. It’s not surprising that robo advising was particularly popular during the pandemic, with investors on lockdown and markets on melt-up. But research, such as a report by Investment News, shows that their use fell with the dislocation in the markets in 2022, suggesting that when the stakes are high and needs are more sophisticated, human interactions count more. 
• Better compliance and risk mitigation Automation is critical to simplifying regulatory compliance. AI applications can assist asset managers with pain points and reduce performance reporting errors. Many asset managers maintain disparate sources of data. Single Sources of Truth (SSTs) create a reliable compliance audit trail for asset managers. AI can also be used to spot trends and abnormalities in business systems, highlighting potential fraud activities.