by Jacqueline Lockie
Over the past year I've been researching vulnerable clients and the advances in Artificial Intelligence in the financial planning profession. I've spoken to CERTIFIED FINANCIAL PLANNER™ professional bodies in 26 countries and attended lectures where I've heard stories from university lecturers, cross-sector leaders, and tech specialists. I've also been immersing myself in Financial Conduct Authority (FCA) consultation papers, hosting Vulnerable Client workshops and having numerous discussions with financial planners in the UK.
While the profession is making great advances in technology, some of these could be a hindrance for clients, while some could facilitate efficiencies for financial planning businesses. Here's why.
The most recent FCA consultation paper on vulnerable clients closed on 4 October. Initially the FCA and many other regulators thought vulnerability applied only to the elderly. But the elderly aren't the only victims of financial abuse.
A 2017 study by the FCA finds that 50% of UK adults display one or more characteristics that signal their potential vulnerability. In the most recent consultation paper, there is a much broader set of categories for consideration of vulnerability: health, resilience, life events, and capability.
So what does client vulnerability have to do with AI? Simply put, how will vulnerable clients, those in most need of help, access your businesses services if they struggle with AI?
I recently met the Stephen Wall at Wealth Mosaic recently who told me about how AI is rolling in with gusto to the financial planning space. But I challenged him about what I heard in a recent lecture: 20-year-olds were being taught how to build and program AI. The lecturer wanted to teach them to consider human nature when creating their algorithms and programs. However, he discovered that they weren't the least bit interested in learning about human nature or incorporating that into their programming.
Obviously, this is just one anecdote, but it highlights a good point: how do we know AI is being developed with the human aspect of financial planning in mind?
One area of AI that is advancing swiftly is the first contact with potential clients. It is likely that before long many financial planning businesses will have an online filter system for potential clients to go through. This will undoubtedly bring efficiency savings long term to a financial planning business, but at what cost?
According to an associate of mine who is a CFP in Japan, in Japan most people have a mobile phone and hardly anyone has a laptop now. Setting aside the ‘silver surfers,' there are still large swathes of the population who might have tech but who are sill not confident accessing it or using it to engage with financial planners. Bearing in mind that the FCA has found 50% of the UK population to be potentially vulnerable, will fintech help or hinder?
From my travels and discussions with other CFP professionals around the word, I think the answer will be a bit of both. Fintech might bring increased expenses to financial planning business initially, as the costs of adding in AI to be the ‘glue' to hold back office systems to cashflow and other tools is implemented. But then it is likely to fall and increased business efficiencies to come into effect, such as by cutting duplication of data input and hosting online client portals. These will drive down costs to the business and ultimately clients, while increasing capacity for financial planning businesses to take on more clients. But in all this there still needs to be consideration of the potential large group of vulnerable clients where fintech will hinder their contact with the advice the most need.
Perhaps, as fintech advances, we can all try and think through the impact we might inadvertently have on vulnerable clients and review the FCA table above to ensure the necessary accommodations are made.
Jacqueline is the Head of Financial Planning at the Chartered Institute of Securities and Investment (CISI). She has worked in the financial services sector since 1988 in technical and training roles and also as a paraplanner and financial planner. She is a Fellow of the CISI and holder of the internationally recognised Certified Financial Planner Licence, for which she was one of the first examiners in the UK.
As Head of Financial Planning at CISI, her responsibilities include care of the financial planning community at CISI, various conference content, running of the financial planning team at CISI to ensure delivery of our Financial Planning Corporate Supporter sponsorship and exhibitor benefits and grow the profession of financial planning in the UK. She also liaises internationally with other CFP affiliate bodies in 25 countries to progress the profession on a global scale. Jacqueline also has a press presence and regularly writes articles and comments on financial planning related news and events in the UK.
