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Sep 26, 2023

Will Your Financial Advisor Survive AI?

by Hugues Foltz Executive vice-president

Technology, Artificial intelligence

It’s no secret that money rules the world. For many people, finances can be a significant stress source, particularly during economic uncertainty. While some may find money matters exciting and promising, others may find them complicated and dull. Regardless, at some point in our lives, we all must navigate questions of savings, investing and making financial decisions. It’s just a part of life.

It's undeniable that the finance world has undergone significant changes. Long gone are the times when you had to physically visit your bank, schedule numerous appointments and make endless phone calls. Nowadays, online banking services are top-rated due to their simplicity and convenience, especially since the pandemic.

With offerings ranging from mobile apps to automated investment platforms, financial services now offer greater transparency, personalization, speed, and, most importantly, accessibility.

Incorporating AI in financial planning and portfolio construction offers immense potential in terms of efficiency, accuracy and security. It helps optimize sales and prevent fraudulent transactions while also considering a wide range of factors that humans, however experienced, can't compete with.

Research has shown that artificial intelligence performs better than us over short periods, and as it gains experience and expands, it will eventually surpass us entirely.

To give you an idea of the extent of AI's capabilities, an American named Jackson Greathouse Fall recently asked the popular ChatGPT app to show him the best ways to invest $100 to generate the most profit. Following the bot's advice, the man founded a full-fledged business and reported earning around $1400 in a single day. After selling a 2% stake to an investor, his company is now said to be valued at $25,000, without even having sold a single product. It is essential to approach this information cautiously, but it's still impressive.

And what about financial advisors? What is the future of these keepers of our portfolios, considering the rise of chatbots that can perform similar tasks? Many are questioning the relevance of this profession, especially with the increasing popularity of robo-advisors.

Simply put, robo-advisors are automated management services that use sophisticated algorithms to recommend diversified and customized placements to investors. Many banking institutions already use them because they are more accurate and efficient than traditional advisors. They can analyze significant amounts of data quickly and effectively. Above all, they know how to summarize it in simple terms - vital elements in the financial services industry.

Financial AI tools offer numerous benefits to both customers and companies, from providing automated support around the clock to personalizing wealth management solutions. One of the most significant advantages is the ability to identify market trends and patterns that would be impossible to spot using conventional methods. This allows for accurate forecasts and information, as well as the ability to adjust strategies in real time to changing market conditions.

Another advantage is the objectivity of these intelligent systems. Although algorithms can sometimes contain biased training data, an AI system is generally more impartial than a human and, therefore, less likely to refuse services based on an individual's appearance, social status, or financial situation. Given that the financial sector has a history of elitism and discrimination, will artificial intelligence be able to democratize it? Quite possibly.

People's fondness for these virtual investors varies. On the one hand, some prefer the personalized touch of a human advisor and find it hard to trust anthropomorphized machines with which they have no connection. On the other hand, the younger generations are comfortable with new technologies and find online services easy to use, giving them more freedom to manage their finances.

One thing is sure: people are increasingly eager for financial independence and can now manage their financial health alone, which was almost impossible before. AI gives ordinary people smarter, safer and more convenient ways to save and invest so they can make the most of their capital.