AI won’t revive robo-advice but could allow advisers to offer simplified advice, according to Derek Smith, head of technology at Morningstar Wealth.
Speaking to FT Adviser, Smith discussed the impacts of technology on the advice market, robo-advice and what AI could do to target those sitting in the advice gap.
Smith said: “There was a piece of analysis that reviewed how many people sought out human advice.
"It said more than 60 per cent of the population still wanted advice and the key moment was when they bought their first house.
"I don't see AI and robo-advice solving that. It can help you in your modelling and can help you in the knowledge about the client, but you still need an interface.”
Instead of reviving robo-advice, Smith thought AI and digital tools could be packaged in a way that could give advisers the opportunity to offer simplified advice.
“These tools could be tied into a subscription offering or it could create a softer journey that brings more people into advice. So instead of people just seeking out advice at high risk moments, like buying a house, people can get used to the ladder of financial needs and build up that knowledge and interaction with digital tools, on an evolutionary basis,” he added.
Smith pointed out advice firms could use an AI solution to help them with their search engine optimisation to be able to engage with a wider demographic that are not currently seeking advice.
He said: “There is an opportunity for advisers to look at how AI can help them with SEO to engage the right people with their marketing material to widen the funnel, in comparison to the past when it may have been a more person-to-person interaction to attract new clients.”
Smith was joined by Steve Owen, director of product management at Morningstar Wealth, who said there was still a “critical” need for a person to be involved in the advice process which AI could not solve.
Owen said: “The question becomes how can AI skills or AI technologies be used to help with generating client engagement. So getting people even interested in the idea that they might need advice, or that they might need help with their savings and investments.
“AI could then possibly create efficiencies through the process to mean advisers have capacity to spend more time with clients, giving them the part of the service that clients value the most,” he added.
Staying away from start-ups
Smith said if he was an adviser he would only be using the “industry players” and would not go to any start-up generative AI providers who have their own language models, where the adviser doesn’t know how it works or how their data is being used.
He said: “It’s risky for advice firms to go to these sort of companies when they don’t have the technical proficiency.
