Jumping on board or holding out: How are advisers using AI?

Adviser Ratings’ recent 2024 Advice Landscape report has revealed how advisers are using AI technology in their businesses to boost efficiency and productivity.

As AI technology continues to seep into aspects of everyday life, the advice profession is now facing the challenge of when and how they will introduce the technology into their practices, if they do at all. This discussion has become particularly relevant as practices look for ways to cut costs and improve efficiency as operational costs continue to rise.

Despite AI’s potential benefits, advisers remain divided with almost half (45 per cent) of advice practices saying they are using or plan to use AI in their businesses, and 38 per cent said they are not using or even considering using it, while 17 per cent remain unsure either way.

Given that AI technology is still a relatively new technology, it is expected that many will be hesitant to jump on board despite the benefits others have gained.

Within practices that are using AI, the report found that the technology is being used primarily as a tool to assist advisers, allowing them to delegate less profitable tasks and potentially allowing them to take on a greater number of clients.

The most common use of AI within practices, according to the report, was for matters relating to client engagement, such as newsletter production, with 61 per cent of respondents claiming to do so.

This was followed closely by marketing, with more than half (56 per cent) using AI for social media, statement of advice (SOA) and record of advice (ROA) production (54 per cent), portfolio management (15 per cent), and 19 per cent stated they used it in other, not-specified areas.

The report explained that some within the profession continue to hold reservations about AI, preferring to use it only for tasks with less regulatory restrictions.

“Some advisers are worried that using AI for advice production will result in a compliance breach, despite the ability of AI to quickly digest rules. Other practices simply see the value of AI in its ability to improve client communications, as opposed to assisting on the production side,” the report said.

Consumers’ perception of AI technology

The report found that consumers are also quite evenly split in their perception of AI, with 38 per cent viewing it in an optimistic light and 34 per cent remaining pessimistic, while 26 per cent are neutral on the concept.

When it comes to the impact AI will have on advice, consumers appear to sit more on the optimistic side, with 31 per cent believing AI will help financial advisers and 23 per cent saying it will help reduce advice fees.

Just 12 per cent of consumers believe AI will replace financial advisers, and 24 per cent say it will have no effect on the profession at all.

“The fact that consumers are using AI tools in various parts of their lives today means advisers need to ensure they understand the application of this technology in the advice space so that they are not left behind by competitors who can offer it,” the report said.

“While offering AI tools to clients comes with reputational risk, partnering with the right provider has the potential to create a pipeline of customers who are likely to require full-service advice at specific times in their life and become more profitable over time.”

Speaking with ifa, Matt Hale, managing director and financial adviser at Rising Tide Financial Services, said that although he has implemented AI into some aspects of his business, he still regards the technology with a considerable degree of caution.

“Not on the financial planning side of things, more from an administrative point of view, using things like for content, for reviewing or summarising our recorded sessions. But I wouldn’t say that it’s a part of our repertoire on a minute-to-minute basis yet,” Hale said.

“One thing when you’re in financial advice, you do need to be reasonably risk averse in a whole raft of different ways. But I see cyber security and AI as particularly one of those places where we need to be, in its infancy, on the more cautious side of things.”