AI Financial Advisors: Can You Trust Them to Manage Your Money?

Welcome to the Sixth article of the Next Gen Fintech (NGF) Newsletter, where we provide with insights on the disruptive fintech world. Today, we are going to evaluate the pos and cons of AI financial Advisory and whethe or not we should trust them with our money.

Lets get to it!

1. What is AI Advisory?

AI advisory in finance is a concept that describes the application of machine learning algorithms and other AI technologies to offer financial advice or manage investments. They use big data analytics to predict market trends, evaluate investment risks, and provide individualized financial recommendations. Usually available on digital platforms like robo-advisors, AI advisors automate personal finance management decisions as well as those related to portfolio management and other financial planning services.

2. What are its Benefits?

The adoption of artificial intelligence technology in finance advisory roles has numerous advantages:

• Efficiency and Speed: Real-time insights can be obtained through the processing of data by AI systems at a pace not seen in human equivalents.
• Cost-Effectiveness: These advisors cut down on service provider overheads due to reduced manpower requirements which consequently reduce the retail cost for end users.
• Personalized Services: By analyzing huge volumes of personal financial records, AI can issue recommendations that are tailored specifically for one’s unique economic standing hence boosting the efficacy of monetary strategy.
• Scalability: Unlike their human counterparts, these machines can handle far more clients hence allowing a wider range of people access to financial tips from professionals

3. What are the Concerns?

In spite of this, a number of challenges face the use of AI in financial advisory:

• Lack of Transparency: Users can find it hard to know how they were arrived at even as AI decision-making processes remain unseen. The consequence could be that trust and accountability would be eroded due to their black box nature.
• Data Bias: Biased AI systems may give skewed advice if trained on such. For fairness, one has to ensure constant vigilance and regular updates for training datasets.
• Regulatory Compliance: The financial sector is heavily regulated, and developing AI systems that are fully compliant with all applicable laws is an intricate undertaking, which requires continuous monitoring.
• Dependence on Historical Data: Reliance of AI on historical data when making predictions might not only lead to poor advice but may also be problematic during unpredictable market conditions.

4. Wanna Try?

If you want to try AI robo advisory, these are the platforms I would recommend:

• Betterment: Great for setting and achieving financial goals with smart tax strategies and tailored portfolios.
• Wealthfront: Packed with tools to plan for retirement and saving for college, and it automates tax-loss harvesting every day.
• Vanguard Personal Advisor Services: Mixes tech with real people giving advice, perfect if you like a personal touch with your tech.
• Schwab Intelligent Portfolios: Manages your investments for free: no hidden fees for advice or account handling.
• SigFig: Works with your existing brokerage to keep your portfolio on track and throws in expert financial advice when you need it.

Newsletter Outlook

At NGF, we explore the emerging trends that shape fintech. I commit to providing you with insights about the evolving world of financial technology, keeping you updated on current trends as well as new inventions and discussions that may take place.

Thank you for taking this journey with me. Do not hesitate to give feedback! Watch out for the next issue ;)