The financial advisory landscape is undergoing a seismic shift, driven by the rapid advancements in artificial intelligence (AI). The traditional role of financial advisers, long centered around providing bespoke financial advice and relationship management, is being redefined. Ian Partington, Chief Executive of Third Financial, argues that advisers’ roles will pivot towards relationship management as AI takes over the analytical aspects of financial planning. This evolution heralds the rise of independent, non-intermediating financial planning, relegating regulated financial advice to a diminishing role.
The Changing Role of Financial Advisers
Financial advisers have historically balanced two primary functions: providing tailored advice and managing client relationships. However, Partington asserts that the analytical side of the job is increasingly being handled by AI. With the ability to process vast amounts of data at unparalleled speed, AI can offer insights and recommendations that no human adviser can match. As a result, advisers’ unique value proposition will lie in their ability to manage and nurture client relationships.
“What can an adviser do that an AI bot, with the sum of all human history and knowledge in its ‘brain,’ can’t? There is absolutely no way at all,”
Partington states. Advisers will leverage AI to access a wealth of information in real-time, enabling them to focus on the human elements of financial planning – understanding client needs, providing reassurance, and fostering trust.
The Self-Serving Future Investor
The rise of AI coincides with a generational shift in attitudes towards financial advice. Younger clients, who are more technologically adept, are less inclined to seek traditional financial advice. Instead, they prefer to self-serve, utilising the plethora of information available online. Partington notes,
“There is a vast amount of information available now meaning people can self-serve. They can google what they should be investing in, so I don’t think the market for financial advice is as strong as it used to be because of this.”
This self-sufficiency signals a decline in the demand for regulated financial advice, particularly from independent intermediaries. Future investors will require comprehensive financial planning services that provide guidance without necessarily involving financial intermediation.
The Hybrid Approach
Despite the trend towards self-service, there remains a need for professional advice, albeit in a different format. Partington envisions a hybrid approach where technology augments human advisers.
“If you are seeking out an adviser, it’s because you want advice about something. You don’t necessarily want to pay that person for the next five or ten years because they gave you some advice one day in the past,” he explains.
This approach will combine the efficiency of AI with the personalised touch of human advisers, offering customised advice at scale.
Technology providers will play a crucial role in this new model. They will offer self-service tools and platforms that enable clients to manage their finances independently, while advisers provide targeted, situation-specific advice. This model allows for flexibility, enabling clients to mix and match the advice they receive and how they receive it.
The Decline of Regulated Financial Advice
As financial planning becomes more about relationship management and less about specific investment recommendations, the distinction between regulated and non-regulated activities blurs. According to the FCA’s guidelines, generic advice becomes part of a regulated activity only when it leads to specific investment actions. However, if clients are increasingly self-serving and relying on AI for analytical advice, the need for regulated financial advice diminishes.
The writing on the wall is clear: the era of regulated independent intermediating financial advice is waning. In its place, independent non-intermediating financial planning is set to thrive. This shift aligns with the broader trend towards greater transparency, integrity, and accessibility in financial planning, as championed by organisations like the Academy of Life Planning.
Conclusion
The financial advisory market is at a crossroads. The integration of AI into financial planning heralds a new era where the roles of advisers are redefined, and the demand for regulated financial advice diminishes. The future belongs to those who can adapt to this change, embracing technology to enhance their relationship management skills and provide value in new, innovative ways. As we navigate this transformation, the ultimate goal remains the same: to empower individuals to achieve financial security and well-being.
Q&A on the Future of Financial Planning in the Age of AI
Q1: How is the role of financial advisers changing with the advancement of AI?
A1: The role of financial advisers is shifting from providing analytical advice to focusing on relationship management. AI can handle the analytical tasks faster and more accurately than humans, so advisers will increasingly concentrate on understanding client needs, providing reassurance, and fostering trust.
Q2: What impact does AI have on the analytical side of financial planning?
A2: AI significantly enhances the analytical side of financial planning by processing vast amounts of data quickly and offering insights and recommendations that human advisers cannot match. This allows advisers to access a wealth of information in real-time, enabling more informed and efficient decision-making.
Q3: Why might younger clients prefer self-service financial tools over traditional financial advice?
A3: Younger clients, being more technologically adept, prefer self-service financial tools because they can easily access vast amounts of information online. They find it more convenient and cost-effective to research and manage their investments independently rather than relying on traditional financial advice.
Q4: What does Ian Partington mean by a “hybrid approach” to financial advice?
A4: Ian Partington refers to a “hybrid approach” where technology and human advisers work together. In this model, AI handles the analytical tasks and provides customized advice at scale, while human advisers focus on relationship management and providing situation-specific guidance.
Q5: How does the rise of AI impact the market for regulated financial advice?
A5: The rise of AI reduces the demand for regulated financial advice as clients become more self-sufficient and use AI for analytical insights. This shift leads to a decline in the need for traditional financial intermediaries and a rise in independent non-intermediating financial planning.
Q6: What opportunities does AI create for financial advisory firms?
A6: AI creates opportunities for financial advisory firms to offer self-service tools and platforms, enabling clients to manage their finances independently. Firms can also provide targeted, situation-specific advice through a hybrid model, allowing for greater flexibility and scalability in their services.
Q7: How might the billing model for financial advice change in the future?
A7: The billing model for financial advice may shift towards more flexible and situational billing, rather than long-term, ongoing fees. Clients may prefer to pay for specific advice or services as needed, rather than committing to continuous payments over many years.
Q8: What is the future outlook for independent non-intermediating financial planning?
A8: Independent non-intermediating financial planning is poised to thrive as the demand for regulated financial advice diminishes. This approach aligns with trends towards greater transparency, integrity, and accessibility in financial planning, focusing on providing comprehensive guidance without necessarily involving financial intermediation.
Academy of Life Planning 