Most adults could benefit from consulting with a financial advisor at some point in their lives. It can give you peace of mind knowing that there is someone you can turn to who has the expertise to help you make smart decisions about your money. But imagine receiving this advice from an artificial intelligence financial advisor.
That’s the concept behind Pefin, a fintech company that is worth watching. The company, which was founded in 2011, is attempting to use machine learning to provide customers financial advice via chat. The fact that there is not an actual flesh-and-blood human on the other side is sure to generate some mixed reaction among users.
Some may be concerned, fearing that artificial intelligence (AI) couldn’t learn enough about financial management to offer the kind of personalized, nuanced suggestions that a human could provide. Others may be more optimistic about the technology, believing that it is a natural step forward in the financial services industry.
AI Improving at a Steady Rate
Regardless of how you feel about the subject, one thing is certain: this is the kind of innovation that we should all notice. Even if Pefin does not succeed in offering the first major AI financial advisory service, it is highly likely that others will attempt to follow suit anyway. Eventually someone will do it right. Artificial intelligence is improving at a steady rate. There will come a day when the technology meets the right company, assuming that day has not already come. The potential benefits and consequences of this development once again prove just how disruptive fintech can be. Watch out for these hurdles in the near future.
While younger customers could be more willing to get minor financial advice from an AI as soon as they have the opportunity, it will probably take some time before they start to make more substantial decisions based on its recommendations. Older generations will probably be even slower to adapt to this change.
That may actually be for the best. Users need to be sure that the financial advice they are getting is sound and reliable. If an AI-based financial advisor only manages to attract a few early adopters, those individuals will basically function as test subjects for everyone else. If they get positive results, they will let others know, helping to expand the service’s popularity. On the other hand, if they are unhappy with the service, other people will refrain from adopting it until improvements are made or another alternative comes along.
It is unlikely that AI will entirely replace human financial advisors anytime soon. However, it is possible that these types of services may jeopardize enough people’s jobs that they may attract a certain degree of negative press.
This is to be expected in the fintech industry. These types of innovations are constantly forcing traditional financial institutions to adapt. Banks already must worry about customers fleeing to startups. If machines start doling out financial advice, you can be certain that there will be some angry customers claiming that a computer would never be able to match a human’s degree of skill and expertise.
Honestly, it is too early to tell whether or not they are right. But if they are not right, it does not necessarily mean that they will admit defeat and make way for the machines. People are going to oppose this concept, whether they are right to do so or not.
Potential Legal Issues
Obviously, any startup that provides people with financial advice via artificial intelligence will have to be aware of the potential legal problems that could arise if their services cause customers financial difficulties.
The best way to avoid such problems is to develop an AI that provides irrefutable advice. But that is easier said than done. Any startup that is seeking to go down this path would be smart to consult with a team of expert lawyers before releasing their product or service. While it is crucial to protect your company, it is even more important to make sure that your customers are thoroughly aware of any risks that they may face by using this type of service.
Again, at the end of the day, this does not change the fact that AI-based financial advice will become more commonplace in the near future and that it will disrupt the industry landscape. Yet again, it is just one more revolutionary fintech innovation that will change the world in one way or another.