Millions turn to AI for financial advice despite FCA warnings
Why do people need to turn to AI to plan ahead financially?
In case we have forgotten, what we bought into with that savings plan, that personal pension plan, that life insurance plan, was that we could, if sticking to the plan have the finance in place to do what we want as we grew older and that our family could be protected if we weren’t around.
The idea was that as we got older we need not do the planning as it would be taken care of for us by the plan. But that cozy view of financial planning went out the window some time ago and it was replaced by wealth management and tax planning which look to maximise the money not to meet the financial needs we have as grow old.
People need to turn to AI to plan ahead because there are no plans that they can buy. They must instead work out how to plan ahead with whatever help is available. That help has magically made itself available for free on our phones, tablets or if we are old fashioned on our “computers”.
According to Zable’s research, 61 per cent or 21.6 million of UK consumers do not feel confident that they know what they are doing with their finances.
That is not what we expected when we started out , when endowments , whole of life and ten maximum saving plans were expected to get us to our goals. There is no replacement for the certainty of the original financial planners. Instead there are a range of financial options including Bitcoin and derivatives that claim they can get us where we want to go with the help of intelligence that is touted as from humans no matter how artificial.
The research also found that 62 per cent of consumers turn to online or other unregulated or informal sources for financial planning advice.
I have no way to verify that this is the case, but I am quite sure that two thirds of people, young and old get help from unregulated and informal advice because they don’t want the alternative. The alternative is “formal advice” which is “regulated” and therefore very expensive. People know that financial advice involves paying for the compliance to the regulation that financial advisers have to follow.
The cost of advice is mirrored by its unavailability to most people. The demand for regulated financial advice is high enough among the well-off that financial advisers (now often called “wealth managers” will work with those who have tax problems rather than needs to turn their pension pots to a wage in retirement, protect the family and make provision for growing frail and needing care.
So there are not regulated financial advisers most people can afford or who want to deal with us. That is particularly the case for those starting out who used to save for times ahead using plans.
According to Zable, the findings show the potential risks as consumers use AI and other online sources to navigate financial decisions without always understanding if the information is regulated.
Having spoken to a few younger adults about this and talking with my peers, I get the impression that what people want is help with the financial plans they have which focus on buying a house , having a way to retire and making sure the family are protected (young and old).
This is what “money helper” was brought in by the Government but it is not interactive as the new AI human-like advisers are. They rely on generic information not direct answers to our questions and when we press the service we invariably find ourselves pointed to regulated financial advisers.
The problem for the Financial Conduct Authority (FCA) is that the cost of regulation is that it has priced financial advice out of most people’s budgets. Employing a financial adviser is too expensive for youngsters and was never envisaged by older people who were told they had bought plans that would do the planning for them.
Actually, we need AI to meet the need we’ve always had and which was promised us either through the workplace or through sales people. The workplace pension scheme that paid a wage, share plans for cashing out, endowments for paying off the mortgage and insurance which paid to family if we got sick or died.
The FCA needs to find a way to turn the artificial intelligence that’s available to answering questions from people on what is replacing what youngsters know their parents and grand-parents have and had. Meanwhile those at the other end need to know how what to do with what they’ve planned with. They need to know how to turn their pot to pension , how to find ways to pay housing costs or let the house pay income and meet later life health costs
Right now , we have the tools in marvellous free artificial intelligence; but we need a way to make it safe for all of us to follow. That’s the next great job for the FCA!