Artificial Intelligence and the Financial Planning industry

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Artificial Intelligence and the Financial Planning Industry


Financial planning is a highly competitive industry with practitioners trying to find an edge to improve their investment decisions. Traditional approaches to predictive modeling can be time- consuming, inaccurate and lacking in context. Artificial intelligence (AI) offers the promise of instantly processing massive amounts of data and of being able to account for additional variables, making it an enticing solution for bringing down costs and biases in financial planning.

Milpark Education’s School of Financial Planning and Insurance (FP&I) academics considered the impact of AI in the financial planning sector. Marilize Putter, Dean of the School of Financial Planning & Insurance, explains that current financial planners need to adapt or use AI in their practices to stay relevant, given the changing market expectations. “They need to consider that their clients are changing in that they will be more empowered and, with ease of access to information, will be far more financially literate”.

Pietro Odendaal states that financial planners need to observe how trends will change in respect of client engagement with Financial Planning professionals. She says, “The most important thing to remember is that AI will not replace financial planners; it will merely be there to assist the planner in delivering a more personalized, proactive, and possibly cheaper service to the client.”

Odendaal says that AI will be able to take over risk management, perform real-time data mining exercises, measure compliance, and so on, which will reduce costs in a practice, ultimately resulting in lower costs for the client. “AI can also be harnessed to provide the client with a more personalized experience. It will be able to instantly tailor portfolio reports and client dashboards, and it will pick up on ‘trends’ as to when clients prefer to meet or be contacted, and what market movements make them uncomfortable so that the planner can contact the client and set her mind at ease,” she adds.

The financial planner therefore still has an important role to play, says Karin Muller. While there is a growing willingness among people to make use of automated services, it does not mean that they no longer require human interaction as well. “Recent studies have shown that while people are prepared to use both forms, there is still a higher preference for a human adviser in financial planning areas. In certain fields, such as estate planning, the partiality for the human element far outweighs that for an automated provider”.

Muller states that people still feel more comfortable knowing that there is a human expert guiding the process. “Also, the value of relationships should not be underestimated, and in the financial planning environment, which concerns the most personal of relationships, the worth of a financial planner to build those relationships, to sift through emotions, to understand their clients, their circumstances and needs, and to strategise and guide them holistically to their goals, is something that AI is not yet, and possibly may never be, able to do satisfactorily for all types of clients.”

This different type of interaction will, therefore, require a different skill set, as Michelle Swanepoel, Head of the Department, remarks. ”As lower level tasks become more automated with increased AI development, the financial planner will need to have the ability to think more strategically about where the business is and where it is going into the future.”

Swanepoel concedes that financial planners must enhance their skills to be able to engage with customers on a deeper level and add value to the unified relationship between AI technology, the financial planner and the customer.

Gerrie van der Merwe says that in addition to skills, one needs to look at the business model. “AI presents new channels available to access new markets and offers significant opportunities for financial planners to drive operational costs down, while increasing efficiency. The challenge for financial planning practices remains the creation of their own identity and having a deep understanding of their client value proposition”.

Van der Merwe says that only then will financial planners be able to identify how AI can be used to complement and even improve their client offering and drive down costs in the business. “For example, it will be important for the financial planner to have an interactive platform where automated services can be accessed, or at minimum leads generated, for human contact to follow. This is vital as the client of the future will be inclined to make use of self-service, preferring a DIY approach and the convenience of having real-time data available,” he adds.

Tyrone Ford says that AI brings to the fore a wide range of financial and insurance products. “Initially, AI systems were used to help with the selection of investment portfolios, but currently, basic insurance or investment products are being made available through these systems. However, the potential of future products and use of AI for the distribution of these products has not yet been measured.” He explains that financial planners will have to guard against complacency and avoiding change; instead, they should harness the opportunities presented by AI.

18 Jun 2018