Has Artificial Intelligence evolved to become better than financial advisors at wealth management?

Artificial intelligence is shaping up to become one of the most disruptive innovations in the history of fintech, but could AI tools ever replace human financial advisors? 

In the United Kingdom, as much as 40% of adults have used AI tools, such as large-language models (LLMs) like ChatGPT, to gain financial advice. As chatbots become more commonplace and stronger with their contextual insights, it’s reasonable to expect this figure to grow further. 

But can AI really replace professional financial advice? Let’s take a look at the capabilities and drawbacks of artificial intelligence insights when it comes to wealth management: 

The road to credibility

Deloitte estimates suggest that AI-driven investment tools are set to become the primary source of advice for retail investors as soon as 2027, with usage set to grow to around 80% by 2028. 

But what does this mean for the credibility of the information investors receive? Artificial intelligence systems have already demonstrated the potential to offer expert, accurate advise to users through big data sets at a rapid pace. 

According to research from Cornell University, OpenAI’s GPT-4 has shown that expert investment decision-making can be emulated by AI, showcasing the ability to deliver strong returns. 

Additionally, Agentic AI advice systems in the form of chatbots can seamlessly collaborate with human experts as a means of integrating insights and expert advice in a collaborative way. 

Improving inclusivity

The troubling reality for many retail investors and savers looking to boost their wealth management is that human financial advisors are simply too costly or inaccessible for their level of wealth. 

This opens the door to AI solutions as a means of improving the accessibility of financial advice, making it more adaptable and functional for all users. 

For strong wealth management, financial strategies must be adaptable enough to cover unexpected life changes such as healthcare costs or delayed retirement. 

Artificial intelligence tools have the ability to assist individuals in gaining a comprehensive financial picture of households and devising a strategy based on the available information to better support the goals and risk appetite of users. 

The agreeable nature of LLMs means that all insights should be used as guidance rather than a blueprint for financial success, and cross-checking strategies with a professional is always a good idea. If you don’t have a financial advisor, free services like Money Helper can make a big difference in supporting your plans. 

Strength in collaboration

Although AI has evolved to provide actionable wealth management advice for individuals, it’s still best to use the technology in collaboration with professionals. 

This is because AI relies on historical data to make its decisions, but can struggle to accurately anticipate future events and prospective market volatility. 

For instance, artificial intelligence algorithms could cause LLMs to recommend selling equities during a stock market crash, while a human advisor could step in to remind you of your long-term goals to ensure that you keep track of the bigger picture. 

It’s for this reason that collaboration between AI and human advisors is a strong strategy for retail investors. While artificial intelligence is excellent at converting existing data into insights, professional advisors still excel at contextualising emerging trends and risks while keeping your strategy aligned with your goals. 

“AI is a perfect companion for proactive advisors because they can assist professionals in moving beyond static annual reviews to provide real-time guidance that changes alongside life circumstances,” said Iván Marchena, Senior Economist at global brokerage brand Just2Trade. “More financial advisors are integrating artificial intelligence into their operations, helping to provide far more comprehensive insights on behalf of investors” 

“People can still get guidance from AI for their financial goals, but advisors are quickly democratising intelligent analysis to further enhance the quality of insights provided to clients.”

For people without an adviser, AI-driven tools can provide self-directed planning that still accounts for complex variables. This helps to ensure financial security while enabling retirees to enjoy their later years, whether they’re travelling, starting a business, or supporting family.

Risks remain

While LLMs and generative AI are rapidly evolving to become more contextually accurate in their insights, artificial intelligence models are still prone to ‘hallucinations’ that can fabricate advice that could ultimately be costly to those acting on it without due diligence. 

In a recent research paper on the use of GenAI for financial advice, Andrew Lo, director of the laboratory for financial engineering at the MIT Sloan School of Management, found that ChatGPT 3.5 had fabricated the names of authors for a paper used to support its responses. 

Although this may not seem like a big deal, it runs the risk of concealing the credibility of the information it processes in a way that could be damaging to investors. 

There’s also the possibility of conflicts of interest, given the high-profile companies that have invested in leading artificial intelligence firms like OpenAI. Given that Microsoft is a major supporter of the platform, could there be a risk that ChatGPT advises more users to buy the tech giant’s stocks? 

The future of AI in wealth management

There’s little doubt that AI will continue to become a disruptive force in fintech and wealth management, but when it comes to matters related to money, it’s always best to use the technology in a collaborative manner with industry professionals. 

The risk of hallucinations, conflicts of interest, or outdated advice can be severely damaging to the wealth of those affected, meaning that GenAI tools are at their most effective when brainstorming ideas and providing guidance that can support the advice of financial advisors. 

Fortunately, we’re seeing more financial services incorporating AI into their operations, with 70% of firms already piloting GenAI solutions to improve automation, sales, and customer service. 

These integrations mean that we can look forward to multifaceted financial support from fintech services in the future, uniting the analytical excellence of AI with the expert insights of financial professionals to give us the best chance of reaching our wealth goals.