At the moment all the buzz within our profession - no, let’s face it, the buzz within every profession - is AI. From the big banks and the global accountancy practices through to small to medium enterprises everyone, it seems, is trumpeting the wonders of AI.
It is pretty impressive. You can select slabs of text from two dozen of the most obtuse and long-winded economic reports and within seconds AI will summarise the story for you with two or three clear, concise and grammar-checked bullet points. This feature of data-digestion may explain why two-thirds of the financial industry in the US has adopted AI.
AI is being deployed within many business systems and processes to drive efficiency. It has become an established tool for lifting office productivity while in some places it is used to replace paid employees.
Should we be investing in AI, or is this just another tech-bubble? Right now, more than a trillion dollars are being invested annually in the global AI field. The eyes of Wall St have been on the chip manufacturers whose recent sales forecasts have provided some assurance that the boom is not in fact a bubble. Unlike the companies during the dotcom bubble, today’s businesses that are leveraging AI generally have larger balance sheets and are reporting healthy profits. As with any emerging industry, it takes time to sort out the winners and the losers, hence the twitchiness in the market.
Our portfolios are well diversified and even in the global shares sector there’s an underweight exposure to tech companies. Our advice to our investing clients is to stay the course and ensure that they have matched their overall portfolio to their goals and needs.
What about DIY financial planning which can be conducted online? Or how about the quality of advice dispensed through chatbot channels? AI may be fine for simple situations but here at Stuart Carlyon, our prevailing view is that the human element is still essential. Anecdotally, we’ve heard some travellers report that using AI for trip planning can lead them to unexpected and unwelcome destinations. As with any automated advice, you need to apply a sense check.
The Human Element Remains Essential
Despite AI's advanced capabilities, it is not a replacement for human financial advisers. Human advisers provide crucial qualities that algorithms lack:
- Emotional Intelligence and Empathy: Our experience is that financial decisions are often deeply personal and emotional, involving fears, dreams, and family dynamics. As advisers we build trust, offer reassurance during market volatility, and provide the empathy and personalised understanding that AI cannot replicate.
- Ethical Judgement and Accountability: While AI can optimise strategies, it lacks an inherent ethical framework to navigate complex dilemmas or conflicts of interest. As your advisers, we remain accountable for all advice and decisions, ensuring they align with each client's goals and circumstances.
- Holistic Perspective and Critical Thinking: We integrate a client's broader life circumstances, such as career aspirations and lifestyle preferences, into a comprehensive plan. We apply critical thinking to question AI outputs and adjust recommendations for unexpected real-world events that AI models might not anticipate.
The thing with AI is that it inherently works on a rear-view mirror basis. It scours the internet, gathers relevant data from this massive repository but never has an original thought. It tends to work off incomplete data and in doing so looks at the ‘average’ person. The trouble is, we have yet to meet an average person.
Given the blind spots of AI, the future of financial planning lies in a hybrid approach, where human expertise sits centre-stage complemented with AI support to provide amore efficient, accurate, and personalised service for clients. We welcome the new technology to help us work smarter and find information quickly (for example, tax regimes of a foreign jurisdiction), but we would always double-check with trusted sources, or better still, seek the expert advice of the accountants and lawyers that we work with.
We stand by the belief that even the most well-meaning algorithms tend to miss what makes you and your situation unique.
