Possibly the biggest buzzword after load shedding these days is artificial intelligence, or AI. Its potential uses have overtaken the promise that the technology once contained. A scary example of AI’s impact was recently shared by Martin Hoffmitz of Business Development Partnerships and Innovation in Canada:
“Combining tightening economic conditions with the increasing ability of AI systems will see the greatest destruction of professional and middle-class jobs in history. One single example: a company I work with consults on tax matters. They used to have 150+ employees at various levels to handle 20 million queries per year. Using various levels of AI, combined with large-scale database leveraging and automation, they were able to cut their prices, tripled business and moved to eight employees. Under the old model, they would have had to employ 450 employees at this volume. Most of those that were laid-off were professionals and white-collar workers, as well as some creatives too. That sort of automation-/AI-driven growth is spreading fast. The World Economic Forum makes no bones about the fact that one of the great challenges will be what to do with all the redundant people.”
A blog on the 10xDS website discusses 10 AI uses for financial services. Some of the most relevant address issues such as fraud detection, risk management, regulatory compliance and client retention. The one aspect that is extremely relevant to us as financial advisers is financial counselling by robo-advisers. Although nothing new, the latest advances are making this a far bigger factor to consider:
“Robo-advisers are not only low-cost alternatives to traditional financial advisers, but they can also facilitate financial counselling for a large group of people, helping to make more informed financial decisions. Besides, data-driven, AI-powered robo-advisers can also recommend investors on scaling their portfolio, retirement, estate planning, etc, which in turn can make the account-opening process an interactive experience.”
Generational preferences
A recent survey by Sanlam showed very clear trends, based on age groups, on the public’s preferences for financial advice.
The main resource for financial advice for South Africans aged from 18 to 49 is “online” – although the survey did not disclose whether this could be, say, the websites of reputable financial institutions or “influencers” on TikTok. The second- to fourth biggest source of advice is family, friends and “other”, respectively.
Financial advisers only become a more important source of advice (28.2%) than family among South Africans aged 40 to 44. They are the primary source of advice (32.9%) for those aged 45 to 49.
The role of financial advisers continues to increase as people get older: 43.7% among those aged 50 to 54; 54.3% among those aged 55 to 59; 55.2% among those aged 60 to 64; and 60% for those who are 65-plus.
Unfortunately, the older people get, the more likely they are to die. I do not mention this facetiously, but factually. If the trend is for younger people to engage on non-personal platforms, then we had better adjust our sails to this wind or we will find our client bases shrinking.
Let’s rather employ Big Brother
The concluding paragraph in the 10xDS article reads: “It is seen that more and more financial institutions are exploring these AI use cases to fuel their digital transformation needs nowadays. Adopting AI solutions are showing promising results in terms of increased efficiency and productivity, and they have great potential for the future as well. Implementing AI to various processes across the company also gives financial services providers a competitive advantage in the market and readies them for meeting all the needs of their customers capably.”
Will we see the day when financial product providers find it far more cost-effective to distribute their products via artificial means to a client base that prefers this to personal interaction?
Consequences
Another ex-pat living in Australia who is heavily involved in the development of robo-advice shares the following:
“Some believe most people will be on a ‘universal pension’ as AI gobbles up jobs. There are already signs of a ‘white collar recession’, not just in the tech sector. I believe a certain section of the community will always demand a human adviser (around 12%). This is the very constant percentage of Australians who use an adviser.
“From an adviser’s point of view, in Australia, this would be 12% of, say, 15 million ‘advisable’ Australians, which is 1 800 000. We have 16 000 advisers (down from 30 000), or 112 clients per adviser who demand a human. So, 12% needs to go around 20% to keep them all busy (200+ clients), but it will never happen.
“Most people like a hybrid model except for Millennials (who are about to enjoy the greatest transfer of wealth in human history). They are happiest with ‘no human’, especially an ‘expensive one’.”
If you can’t beat them…
Rather than fight what seems to be inevitable, one should stay abreast of these developments and find ways to harness their potential to one’s own benefit.
As always, there is a musician who summarises this situation so well. In Angry Young Man, Billy Joel sings:
I believe I’ve passed the age of consciousness and righteous rage
I’ve found that just surviving was a noble fight
I once believed in causes too, had my pointless point of view
Life went on no matter who was wrong or right
And there’s always a place for the angry young man
With his fist in the air and his head in the sand
He’s never been able to learn from mistakes
He can’t understand why his heart always breaks
His honour is pure, and his courage as well
He’s fair and he’s true, and he’s boring as hell
And he’ll go to his grave as an angry old man
