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Prompt Advice

ARTICLE BY

  • Jen McKay
  • Director
  • Linktank

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In Linktank’s most recent annual Advice Technology Survey, South African advisory businesses shared their feelings on the potential impacts of AI on the industry. Here are some of the key findings.

The impending integration of generative AI into the financial advice sector prompts diverse speculations about its implications. Beyond the educated predictions of an increasingly varied range of experts, and closer to the grassroots, Linktank’s most recent annual Advice Technology Survey delves into the opinions of participants – mainly small and mid-sized IFAs – within the South African advice community.

Potential and appetite

Generative AI holds promise to revolutionise financial advisory services by streamlining tasks and allowing advisers to focus on high-value activities. While just over 20% of surveyed businesses have already implemented AI tools to aid internal functions, more than half of respondents are keen to explore opportunities in the future to harness AI toward greater efficiency and profitability.

Despite the potentially industry-altering benefits, though, AI evolution is also likely to disrupt traditional business models, leading to a shift in the role of advisers towards more specialised and high-value services. Even so, almost 80% of survey respondents anticipate a largely positive impact on their own and their peers’ businesses over the next decade.

This optimism is especially thought-provoking when we consider that fewer than a quarter of the same respondent base considers AI-powered chatbots to be a worthy technology investment right now. The industry’s perception of the most valuable tech, in fact, remains much the same as ever – with financial planning calculators and advice tools, CRM and practice management software, and document management tools topping the list. This leads me to wonder how many IFAs actually intend to research, identify, experiment with, and implement appropriate AI-powered services with their specific use cases in mind, or whether most businesses are relying on their current technology providers and product providers to bring the AI to them via the tools and services they already use.

Challenges and perceptions

In an industry that has struggled for decades to transition from paper, and in which fewer than 20% of surveyed practices have successfully systemised all their business processes and fewer than 40% fully trust the integrity of their client databases, it’s difficult to imagine a joyous leapfrog into a totally data-driven AI world overnight. Only about a third of surveyed businesses currently even offer their clients an online portal via which to view financial details, self-service, or interact with their advice team. Half say they’d like to consider an online client portal in future, and this general sense of kicking the can down the road a bit longer is likely to apply to the adoption of AI innovation too. From experience in unpicking this trend among independent advice businesses, we know that many hesitate to provide their clients with an uncurated experience of their consolidated financial information and instead opt to individually review and present it, largely for fear of incomplete or outdated data that is frequently manually sourced and maintained – old problems that won’t necessarily evaporate by virtue of shiny new technology options hitting our screens.

Security and privacy are central to a data-centric industry and, with fewer than 40% of respondents feeling confident that everyone in their business is sufficiently educated about the principles of data security and privacy, and roughly the same proportion feeling confident that they currently have sufficient cybersecurity measures in place, it seems there’s a ways to go yet.

The top five technology-related challenges experienced by advisory businesses remain pretty consistent, with most businesses citing much the same banes as ever: poor integration between systems; lack of implementation and adoption resources; the difficulty of identifying and selecting appropriate tools in the first place; balancing cost and value; and the complexity of digitalising business processes. All of these pre-existing challenges will naturally bleed into any new technology framework.

The cost of innovation is always a big consideration locally, of course, especially when we’re spending our rands on solutions priced in dollars or euros. Forty percent of businesses currently invest 20% or less of their revenue into technology and about half expect this amount to increase over the next three years, so there does seem to be some anticipation of greater investment in the immediate future.

Despite the challenges, a positive view of the impact of AI on advice businesses is pervasive and more than half of surveyed businesses are keen to implement AI tools in the future. Fatigue with stubborn old technology-related frustrations lingers, but the appetite for embracing fresh innovation is apparent. As businesses navigate the landscape of technological advancements, careful consideration of challenges and opportunities will be essential in harnessing the full potential of AI in financial advice.

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