Gearing up for the next growth phase of the advice sector with AI

Artificial Intelligence (AI) is revolutionising industries across the globe, and the financial advisory sector is no exception. Contrary to popular belief, AI will not replace financial advisers or paraplanners. Instead, it will empower them to work more efficiently and serve a broader client base. 

Throughout history, technological booms have consistently shown that embracing innovation is the fastest path to success. Just as the rise of e-commerce at the turn of the 21st century saw companies like Amazon and Google flourish while those resistant to move their business online faltered, we find ourselves at a similar crossroads with AI today.

Generative AI has the potential to automate work activities that absorb 60 to 70 percent of the employees' time today across any sector. This is a result of the speed at which Generative AI models are evolving. Today, Generative AI models such as Claude, can process 200,000 tokens or 150,000 words per minute. That's the equivalent of about 2 novels! 

This transformative potential is already making waves in the financial advice industry. A recent survey of 180 UK financial advisers by Aegon revealed a significant shift in attitude towards AI adoption. As high as 73% of advisers are ready to use AI in their daily operations, with 35% specifically citing increased efficiency as their primary motivation. These figures underscore the growing recognition that AI can significantly streamline administrative tasks, allowing advisers to focus more on client relationships and strategic planning.

While generic AI models offer impressive capabilities, they fall short in addressing the nuanced needs of the financial advice industry. To truly revolutionise the sector, AI solutions need to be trained on extensive, industry-specific datasets. This specialised training enables AI to produce output that closely mimics the expertise and communication style of experienced financial advisers and paraplanners. Enter AdvisoryAI, a tailored solution designed to bridge this gap and empower financial professionals with AI that truly understands their unique challenges and requirements.

AdvisoryAI: Tailoring AI for the Financial Advising Industry

The widespread adoption of AI can be attributed to its reliability and impressive capabilities. Many of us experienced a moment of awe when first using ChatGPT or similar Large Language Models (LLMs). This "wow" factor demonstrates the potential of AI to transform various sectors, including financial advice.

However, the financial advice industry faces unique challenges that general-purpose AI models struggle to address effectively. One of the most pressing issues is the creation of suitability reports - comprehensive 10-15 page documents mandated by the Financial Conduct Authority (FCA) for every financial advice firm. These reports are notorious for being time-consuming and complex to produce, often becoming a bottleneck in the advisory process.

While general-purpose LLMs have demonstrated proficiency in handling basic financial planning queries, they fall short when it comes to the nuanced, industry-specific requirements of suitability reports. This gap in capability highlighted the need for a specialised AI solution tailored to the unique demands of the financial advice sector.

At AdvisoryAI, we've developed Emma, - an AI model specifically designed to tackle the suitability report challenge. Emma stands apart from generic AI solutions due to her specialised training on thousands of actual suitability reports and annual review letters from the advice industry. Emma boasts 95% accuracy in generating concise, easily understandable outputs tailored to financial advisers' needs.

To put Emma's impact into perspective, consider the current state of report writing in the industry. On average, a paraplanner spends approximately 3 hours crafting a single suitability report, producing about 7 reports per month. This translates to 21 hours - more than half a standard work week - dedicated solely to writing these essential documents.

Emma dramatically transforms this process. By reducing the time required to create a suitability report to just 5 minutes, Emma provides paraplanners with an invaluable tool that introduces unprecedented efficiency to their workflow. 

The Positive Impact of AI on Financial Advice

As an ex-financial adviser, I've witnessed the sector's struggle with mounting client demands and outdated processes. We labour in an industry where clients expect so much, yet our methods remain archaic. The constant rush to prepare client documents and utilise paraplanners efficiently highlights the need for change. AI offers us a remarkable opportunity to accomplish more with less, streamlining our operations significantly.

One in five people in the UK struggle to find a financial adviser due to a lack of quality advice or advisers being at capacity. AI has the potential to bridge this gap by freeing up advisers' time from administrative tasks, empowering them with deeper client insights, and enabling them to handle a broader range of client queries effectively.

Currently, an adviser in the UK has a client capacity of 100 clients. This typically involves producing about 100 annual review letters per year – one for each client. Additionally, advisers generate suitability letters for new investments or changes to existing portfolios. On average, an adviser writes about 7 suitability letters per month, totalling 84 per year. An annual review letter takes approximately 2 hours to write, while a suitability letter requires about 3 hours. This equates to 452 hours annually spent on document preparation alone (100 × 2 hours for annual reviews, plus 84 × 3 hours for suitability letters). By leveraging AI assistance, the same adviser could potentially serve up to 300 clients, reducing document writing time to just 30 minutes per document. This would result in only 92 hours spent on the same number of documents annually (184 documents × 0.5 hours), freeing up 360 hours for more valuable client-focused activities.

However, this doesn't mean AI will drive every aspect of business at advisory firms. In fact, clients don't want everything to be AI-driven. A Salesforce survey shows 81% want human involvement in their interactions with organisations, particularly to validate AI outputs. Paraplanners, therefore, aren't going anywhere. Instead, they'll need to upskill and become AI technology experts, allowing them to work more efficiently, handle a larger volume of clients, and focus on more complex, value-added tasks.

Embracing AI: The Way Forward

Given the potential benefits of AI in providing quality financial advice and increasing efficiency, the question becomes: as an advisory firm, why wouldn't you adopt AI? By embracing this technology, financial advisers in the UK can serve more clients without compromising on quality, provide more comprehensive and tailored advice, and stay competitive in an evolving industry landscape.

The integration of AI into financial advisory services represents an opportunity rather than a threat. By adopting AI tools and upskilling to work alongside this technology, financial advisers and paraplanners can enhance their capabilities, serve more clients, and contribute to closing the advice gap in the UK. The future of financial advice is here, and it's powered by AI.

Take a demo of AdvisoryAI today and learn how AI can empower your company to provide quality advice to clients.