How are advisers using AI in their practices?

According to recent research from Adviser Ratings, the “ubiquitous presence” of artificial intelligence is leading to its integration into financial advice.

“Increasingly, AI is becoming a staple tool for financial advisers, enhancing their capabilities, streamlining operations, and cutting costs,” the research firm said.

“However, questions regarding how clients perceive AI and its potential impact on financial advice remain prevalent.”

The research included surveys with both consumers and advisers and found that the most common way that advice firms are utilising AI is in client engagement, such as newsletter production, at 47 per cent.

Following this was marketing, such as social media, with 43 per cent, the production of statements of advice (SOAs) and records of advice (ROAs) (41 per cent), and portfolio management (12 per cent).

“Leveraging AI in these areas can enhance client interactions, personalise services, and optimise marketing efforts, thereby improving overall efficiency and effectiveness while reducing costs,” Adviser Ratings said.

Adviser Ratings found less than half of advice practices are currently utilising or considering implementing AI tools in the future.

Upon further analysis, the researcher found the size of the practice appeared to be a contributing factor to whether they were using or considering using AI, with larger firms more likely to do so.

Findings showed that 70 per cent of firms with a “higher number of advisers” are either considering implementing AI into their service processes or already have, whereas only 40 per cent of firms with just one adviser have or plan to do so.

Adviser Ratings said “resource availability and implementation costs” may have contributed to this disparity.

“Embracing AI isn't just about competitiveness; it's leveraging technology to serve clients better and navigate modern finance complexities,” it added.

Exploring consumers' views on the impact of AI being implemented into advice processes, only 27 per cent of consumer respondents believe AI will not affect financial advice in Australia.

Of the remaining 73 per cent, 35 per cent think AI will help advisers, 26 per cent say it will help reduce advice fees, and 14 per cent believe it will replace advisers altogether.

“While they don't foresee AI replacing financial advisers entirely, they anticipate it will assist in their work, ultimately reducing consumer fees and fostering a win-win scenario,” Adviser Ratings said.

“Building trust and understanding among advisers and clients will be crucial in unlocking AI's full potential and ushering in a new era of personalised, data-driven financial guidance.

“While challenges exist, consensus suggests AI will complement human expertise, fostering a collaborative, technology-enhanced landscape.”

Adviser Ratings added that AI in advice should be approached with cautious optimism, embracing its potential and addressing any issues.

“As AI continues to evolve and demonstrate its value in the financial advice landscape, it's crucial for both advisers and clients to embrace its potential benefits while addressing any concerns,” it said.

“Education and awareness about AI capabilities and limitations will be essential in fostering trust and encouraging widespread adoption.

“Additionally, ongoing research and development efforts should prioritise ethical considerations and the protection of consumer data to ensure responsible AI utilisation within the financial sector.”