The human touch, the real edge in the age of AI

The spread of Artificial Intelligence (AI) in Financial Advice and machine learning shines a light, rather than casting a shadow, on the value that the most insightful financial advisers add. As artificial intelligence takes over the analysis of yesterday’s events and the modelling of tomorrow’s, financial advisers are freed up to focus on the client in the here and now. Understanding who the client is and what they want and, crucially, how who they are might get in the way of what they want, will continue to make a meaningful difference.

AI as a powerful tool, not a replacement

Dave Pledger, owner and director of Spectrum Group, says: “AI helps you cut through the clutter, gets you to the information fast. But it is not going to replace what we do”. Human insight remains vital. “AI is not going to help you to be intuitive. It’s not going to tell you how risk-averse someone feels when markets wobble or when they lose a job. That’s about understanding the person.” 

Even as AI reduces some of the workload for financial advisers, they will sometimes have more of the nuanced, people-centric work to do. They might, for example, struggle to persuade clients that the ‘genius’ in the machine does not always know best. Also, in the words of Khadeeja Bassier, Chief Operating Officer at Ninety One: “As with all technological aids, AI is beginning to unpeel the opacity of a complex industry, which means advisers will likely face more incisive questions from their clients. Our belief is that this is a positive development for financial inclusion and financial literacy.”

Behavioural finance takes centre stage

In this new landscape, the value of advice will not be defined so much by who can crunch the numbers fastest, but by who can go deepest in terms of understanding client behaviour and influencing it. In short, behavioural finance has never mattered more. Bassier says: “Financial advice is both an art and a science, and part of the value lies in understanding the client’s needs in a way that leads to the likely course of action, not necessarily the most logical one. AI is excellent at generating possible scenarios and outcomes and assessing the optimal path for each of those scenarios … [but] cannot yet precisely account for the randomness of human behaviour. The magic of a financial adviser lies in striking the balance between the plan and the human’s will to translate the plan into action for better financial outcomes.”

Pledger sees the adviser’s job as “to be a filter, a simplifier”. He says they should use AI “to do the heavy lifting, the grunt work, get the data, compare the funds, run the tax calculations”. Then, he says, they can spend time “on what really matters, the client”. 

Human emotion: The missing data point

AI tools can scan markets in milliseconds and model outcomes with extraordinary accuracy, but even the most advanced system can’t grasp the emotional weight of money in a client’s life. No AI model can connect with the anxiety some people experience during a downturn, or the thrill they feel in an upturn. No algorithm that can accurately measure the pleasure of knowing that sacrifice today will be repaid in a child’s financial security. For machines, no matter how “intelligent”, the human compulsion to take a risky bet just will not compute. 

On the portfolio management side, Siviwe Jeyi, Business Development Analyst at Mergence Investment Managers, says AI “is likely to be adopted as a support tool to enhance, rather than replace, existing fundamental and quantitative approaches”. He says: “We believe AI will increasingly be integrated into the investment decision-making process to enhance data analysis, improve forecasting and support portfolio construction. Over the next few years, it is likely to become a valuable complement to both fundamental and quantitative approaches and accelerate decision-making, reducing behavioural bias and improving the efficiency of research and risk management. However, human oversight will remain essential to validate model outputs and provide contextual judgement.”

Judgement over data

Ninety One’s Bassier adds: “Portfolio optimisation in a data-rich world is infinitely achievable. Convincing a client not to sell during a market downturn and to stay the course is an entirely different gambit. This is where client context and trust are pivotal – and where real value is added.” Describing AI as unbelievably useful, especially for fund managers, Spectrum Group’s Pledger says: “You want to sort through dividend records or find trends? AI will do that in seconds. But, at the end of the day, it is still a judgment call. The information helps, but it doesn’t make the decision for you … even the most data-driven people have blind spots.”

One of the most compelling arguments in an AI-augmented world is that bias can persist regardless of the quantum or the quality of data. In the context of instant answers and an avalanche of algorithmic noise, basic psychological factors such as loss-aversion and the instinct to follow the herd can be harder to manage. 

Advisers who understand this and can assist clients to understand, name and navigate their biases will be able to help them leverage the easily accessible inputs generated by AI for the best possible outcome for their context and goal.

AI in Financial Advice mirrors societal bias

Bassier also points to the fact that data is a mirror of societal biases. “We see the technology absorbing a Western corpus of values and ethics. Data is infinite, and so we are always at the mercy of those who do the slicing. It is never entirely objective and always wears the lens of its framer.”

Experts talk about “behavioural alpha”, the value added through an adviser’s ability to influence a client’s behaviour. Helping a client to stay invested during a sudden, drastic downturn, for example, is a human intervention with measurable financial consequences. In a world of data overload, behavioural input will be seen less as a nice-to-have, a “soft skill”, than a core competency.

Few dispute that there is no resisting AI. What most advisers are doing is embracing the new tools, putting them to work doing all the drudge work. They are using time that is freed up to go deeper with clients, understanding their psychology better and building stronger relationships. 

Emotional intelligence as a competitive edge

As with many of the great shifts in human development it is not a case of machine or human but a combination of the two. AI is here to stay. So is human input. As our lives become more technical and complex and the available data becomes more overwhelming, many clients will crave real connection and human reassurance, especially when facing high-stakes financial decisions. The advisers who stand to perform best in this new era will be those who combine technical fluency with emotional intelligence. Bassier recommends that advisers engage with AI as if it were an “arrogant intern”. 

“It is vital to recognise the immense efficiency it brings but not to cede control,” she adds. “Strength lies in deepening the human relationship with the client and using AI to better understand their needs and context.” Intelligence is not simply understanding what the data says, but how it makes the client feel.