Discussions about integrating artificial intelligence (AI) into advice practices have been widespread in recent years, with some experts seeing the successful, purposeful implementation of AI as vital for securing a firm’s long-term viability.
“The tech-savvy practices operate with 55 per cent fewer staff while maintaining high service standards and achieving profit margins at least 10 per cent higher than their competitors,” Marshan Consulting founder Ben Marshan said.
Though some fears remain about implementation of AI, industry leaders are now positing that the advice process can be enhanced with this new technology and complement traditional face-to-face client interactions.
However, many unadvised investors are already jumping the gun on advisers and are using free, non-specialised AI tools such as ChatGPT, with the cost of advice being a likely reason for this.
According to data from Chartered Accountants ANZ (CA ANZ), ChatGPT and Microsoft Copilot are becoming popular models of seeking advice to unadvised investors.
“Almost half (48 per cent) of surveyed Australian investors said they use AI tools to make investment decisions, CA ANZ CEO Ainslie van Onselen said.
“And more than two-thirds (81 per cent) are at least somewhat satisfied with the information AI provided.”
Of those surveyed, Gen Z investors (18–29) were the most likely to use AI for financial and investing advice, with 78 per cent saying they had done it before.
A likely reason for this outcome is the growing advice gap, with investors who are wanting advice seeking it elsewhere.
“I think the cost of advice, the scarcity of advisers and how people consume and search for information are all factoring into this,” Robert Devlin, head of advice and partner at Tribeca Financial told ifa.
My Dealer Services managing director Alex Euvrard also sees this use of AI as a sign of the growing advice gap.
Euvrard told ifa that Gen Z in particular are using it to fill this gap.
“It is a sign of the younger generation and those familiar with the strength of AI are relying on AI tools as a source of truth,” he said.
Though the information provided by these platforms can be useful it does little to fill the gap left by a lack of good, face-to-face advice, and exposes investors to some of the flaws within these free AI platforms.
“The limitations are that the information can often be outdated as well as they sometimes give plainly incorrect answers,” Devlin said.
Euvrard also emphasised the dangers of what is known as AI “hallucination”.
“We have had both advisers and their clients [that] use ChatGPT get given completely wrong and non-compliant advice,” he said.
Echoing concerns around non-compliant AI-generated advice, Devlin highlighted that unadvised clients have little to no consumer protections if they choose to follow an AI tool’s poor advice.
For both Devlin and Euvrard, the relationship between the advice gap and AI should not be one of competition, but as a means to help close it, easing workflows and freeing up time to potentially help unadvised clients.
“AI will and should assist all financial advisers as a meaningful tool but it will not overtake that human trust and relationship,” Euvrard said.
Devlin added: “We use AI in our business and we know that we need to always review and reference any information it provides as there are clear limitations.”
