AI offers assistance to financial companies but is not ready for more complex tasks

The proliferation of AI-based systems presents significant opportunities for financial services firms, but asset managers also face greater risks than other consumer-facing companies because they manage sensitive information, executives say.

For example, AI systems can be better than humans at explaining to customers why they arrived at recommendations like portfolio allocation or lending decisions, said Zach Cass, former head of business partnerships at OpenAI. He said people are not good at explaining the unconscious biases that can influence such decisions.

“AI should make that much better. The problem is that if we’re not careful, it’s going to make it worse,” Cass said at a Morningstar investor conference in Chicago this week, where the rise of AI systems was a recurring topic of discussion.

In theory, AI will simplify many routine tasks like filling out compliance forms or developing portfolios that aren’t overly complex, leaving financial professionals more time to focus on human interactions or problems that require deeper thinking, many investors and technology experts said.

“There are some things that machines can make easier, so the financial advisor can spend more time serving their clients,” said Karen Zaia, a senior research analyst at Morningstar who tracks investment managers’ use of technology.

But the depth of human interactions with AI will vary, she said. While AI-powered chatbots have become popular for tasks like helping choose a seat on an airplane or checking a bank account balance, the variables are much more complex for things like arranging investments in a retirement plan.

“I don’t think this is on the industry agenda right now,” Zaia said. “All of these companies we’ve talked to are very thoughtful and careful in how they do these things. They want to be taken into account.”

US regulators are seeking public input on the use of AI by financial firms, seeking to promote universal and equitable access to their services. Treasury Secretary Janet Yellen warned this month that the use of AI in finance could lower transaction costs but comes with “significant risks.”

The spread of artificial intelligence may tempt companies to cut jobs in areas such as call centers or in software development facilities, but they will still likely need human workers to handle more complex matters, said Margaret Vetrano, portfolio manager at ClearBridge Investments.

“AI can be used to develop code, but that doesn’t mean you’re laying off all your developers,” Vetrano said. “Maybe you’re using it to develop the first pass of code, and then you still need someone who’s sophisticated and knows the code to look at it and say, ‘Let’s think about User experience here.

Brenda Ingram, a Chicago-based financial advisor, said she hopes AI systems can save time and expense in preparing things like compliance reports.

“The normal thing is, if you could get the AI ​​to do it, I think we would love that,” she said.

—Ross Kerber and Susan McGee, Reuters