As the last 12 months have seen, artificial intelligence made quite an impression on both the financial advice industry and the wider world. In a webinar last week, DASH Technology Group chief platform officer Darryl Johnson argued that implementing this emerging technology is crucial to engaging the next generation of clients.
“Next gen knows tech better than most of us, right? They live on tech. They live on their phones. So, how do we connect with that next generation when it comes to providing advice and helping them with their investments?” Johnson said.
“Well, we need to connect on the same level. They’re using AI, we need to get involved in AI. We need to understand the technology. And I say ‘we’, I mean the royal ‘we’, the whole advice space.
“So, connecting with them on the same level is really important and having exposure to AI and giving them access to tools that are AI-based or technology driven, I think, is really important to be able to connect with that audience.”
Adding to this discussion, DASH chief executive Andrew Whelan explained that AI is having the most significant impact on improving the efficiency of advisers in the shortest period of time and, subsequently, will help bring down the cost of advice.
However, he also voiced concerns about the future of AI in advice, fearing that, due to the pace at which AI is evolving, industry regulators may feel the need to over-regulate the use of this technology, much like they have done to the advice profession in the past.
“It’s here. It’s not going away. The horse has bolted. So, it’s really about an adapt or die situation, in my mind,” Whelan said on the webinar.
“My biggest fear for the industry, frankly, is there’s a big review going on by Treasury at the moment, and since it’s complex, and it’s moving so quickly, I think one of the worst possible results for us as an industry would be ASIC over-regulating again.”
On the other hand, Whelan also argued that AI still should not be generating financial advice, despite the scalability opportunities of AI in the advice sector, because it is “a bit of a black box” and particularly hard to audit, hence making it challenging to hold to account if something were to go wrong.
“Personally, I’m not a fan of AI generating the advice. I think an adviser needs to be overseeing that,” he said.
“I think that the most powerful way [to use AI] is to really streamline the back office, which has always struggled under the burden of regulation. But I wouldn’t, I’m not in the camp yet in terms of, should it be actually picking stocks or creating the advice.”
This issue becomes particularly important when it comes to clients who, after receiving bad or inappropriate advice via AI tools, seek recompense through the Australian Financial Complaints Authority and the Compensation Scheme of Last Resort.
While there are some complexities that come with using AI in the advice space, Zein El Hassan, a specialist financial services lawyer and partner at Mills Oakley, explained that technology firms that choose to implement AI into digital advice tools are legally accountable for the advice provided.
“Whoever is the provider of the service is the legal provider of advice. So, Otivo, for ‘Ask Otivo’, they’re using AI and they’re using [open AI] with some guardrails,” Hassan told ifa following an industry event in Sydney last week.
“We only give it access to the output of their digital advice and all that the technology does is just use words to generate the advice so Otivo is the legal entity that is responsible.
“If the advice from ‘Ask Otivo’ is wrong, they get sued. So, even though they’re using [open AI] as the underlying technology, they’re still liable.”
Similar to DASH, Otivo also said it uses AI solely to reword the advice already provided by the Otivo platform to help improve client understanding, however, AI is not used to generate the actual advice.
