AI Revolution in Finance: A Game Changer or a Threat?

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TRANSCRIPT:

Welcome back to Financial Foundations brought to you by Base Wealth Management. I’m your host, Dustin Taylor. I’m your co-host, Alex Wolf, Certified Financial Planner®. Today, we’re talking about how AI is affecting the financial industry. Alex, do you want to kick it off?

Exploring AI’s Role and Impact

Yeah, so I love this topic, and I feel like I say I love this topic every podcast because I’m just really excited about some of these things going on in our world. The buzziness of artificial intelligence and the practical and real use cases for AI in many different sectors, and we use it almost daily within our industry. There are companies that we invest in that are driving innovation, and they’re making chips in regards to AI. So that’s really fun to be able to research those companies and how they all fit into our portfolios that we’re constructing. But in addition, you always want to approach things with a little bit of caution. There’s not always a benefit to new technology in every case, so there are definitely some things to think about when it comes to AI and finance.

Yeah, I think there’s no doubt that probably in every industry, AI is helping, such as I’m sure you’ve all seen on websites, there are little chatbots there where you can just quickly, with on your keyboard, type out a question, it’s going to spit out the answer. And a lot of them now are using information about that particular company, so it can be that company’s own chatbot. It knows all the company’s policies; it knows all the information about that company and how it works, and you can quickly get information on that topic that you have, whereas before you may have had to call an agent, or especially if you had some sort of nuanced question, then you definitely need to speak to an agent, whereas now AI can help you very quickly.

Yeah, there’s no doubt that it can efficiently answer questions, but is its response always factually correct? Maybe not. So it’s only as good as the data that it’s being fed, right? And so you do need to typically fact-check the AI, make sure that it is correct. But with that thought in mind of AI being able to answer questions quickly, that means maybe some agents are out of jobs.

AI’s Efficiency vs. Human Touch in Financial Advisory

Do you think that AI can replace financial advisors?

Yeah, great question, and no, I don’t, and I’ll explain why. I think it can help financial advisers, but I don’t think it will replace your adviser or your financial planner within our industry, and I’ll tell you why. So one is there’s so much emotion when it comes to constructing your financial plan and your investments; there’s a lot of emotion that goes into it. You know, when you’re collecting client information and learning about their family and personal lives, that’s not something that can be replicated or duplicated from an AI version of an advisor.

So you mentioned that AI is being used within the financial industry. What are some ways that you’ve seen it used in instances when you have clients? You know, you might, an adviser may be working with, you know, several hundred clients, and you can use artificial intelligence or AI to obtain certain information about those clients. Not the bad, but say you’re trying to look for all your clients who are turning 60 this year, and you want to start having a broad conversation or a detailed conversation about, ‘Hey, let’s slow down and look at your Social Security. You’re coming up on 62 in a couple of years.’ You can look through your clients and use that data on their ages to talk to them about specific financial information.

Right, and what about when it comes down to the numbers? I’ve seen recently where there are some spreadsheets, and before, if you wanted to compare different sheets and different tables and things, you would have to create something called a pivot table to match those, whereas now you could do a text-based question to find patterns and relationships, or it can even cross the different sheets that I’m talking about, multiple sheets, and can compare, you know, your client list, not in particular about the financial industry, but you can look at a client list and compare that to the amount of income, and you could just ask the question, ‘Who was the top customer for me?’ And it would spit that out, whereas before you may have to do a lot of, you know, formula writing and stuff to figure that out.

There’s a lot of efficiencies to be gained in many industries by being able to utilize these types of AI features, and that’s going to benefit the economy from improving efficiencies and increasing productivity, and I think that’s a really good thing. So that is how it can benefit the financial industry, maybe financial firms, and maybe even independent financial advisors. How does this benefit the client?

So when you think about any advancements i technology, there’s a lot of useful benefits, and one of the great technologies that we have is the ability to now manage a client’s workplace retirement account. So what we have is technology that allows the client to add us as like an authorized individual to their retirement account, their workplace, like 401k or 457, those types of accounts, and be able to actively manage it, where before we would have to say, you know, they’d bring in a statement and show us their current investments and what their plan allows them to invest in, and we’d say, ‘Okay, I recommend you make these changes,’ and they would go hopefully make those changes. But now, this technology allows us to actually actively manage their workplace retirement plan.

And not only that, we connect it with our Base Wealth Management client portal. So think of the portal as a great way to view all of your accounts, your brokerage accounts, your IRA, your workplace retirement plan, maybe you have a stock plan account where you get company stock, and you can log into that one website, our portal, and view all of your assets. So you know exactly where your accounts are, how they’re titled, which ones are taxable versus non-taxable, and the investments inside of them. And what that does is allows us, as your financial advisor or planner, to cohesively manage your total portfolio and incorporate that into your big picture financial plan because that allows us to efficiently manage it and make sure that we’re not overly concentrated in any one particular fund or stock where people can get into trouble where, you know, they have outside holdings at a different firm that we’re not managing. I don’t really know what’s in that account, so by aggregating that through our portal, we can actively view the whole portfolio.

I think that that sounds like a really great way to leverage technology, and I know there’s some other ways, like in terms of analyzing risk and things like that, but now I want to talk on a bigger scale. How is AI and this AI boom affecting the economy?

I think that’s a more important question, is like, what is AI doing for us as a society, and you know, the optimism that it brings to create efficiencies in our daily lives in many different industries and the increase in productivity that it hopefully brings. As many of our clients are working, they may find practices of using AI in their industry to help them get more done in a day. So think about that, like if you’re able to do two times more work in one day because you can use AI in some fashion to help make your life easier, if it’s combing through data, finding information, maybe it’s writing an article, you know, there’s many different practices, but that is going to ultimately improve productivity and output, driving the economy further.

All right, so there you have it. We have introduced this topic of AI and the financial industry on this podcast, and we will definitely be bringing it back. There is so much more to explore; we just wanted to do a slight introduction today. If you want to hear more advice or information about financial news and topics, you can subscribe to our YouTube channel.

Yeah, don’t forget to subscribe to this podcast on your favorite podcast listening app. Everything is available at BaseWealthManagement.com. I’m your host, Dustin Taylor. I’m your co-host, Alex Wolf, and happy listening.

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