Make AI an ally, but nothing beats the personal touch
A blend of human and machine is essential because high-quality tax and financial advice requires more than basic number-crunching.
The rapid acceleration in the rise of AI is hard to ignore. Whether it's a recommendation system on social media, facial recognition on your smart device or object detection in your vehicle, the chances are you've adopted AI without even realising it.
With the applications for AI being so expansive, modern-day financial professionals find themselves navigating an environment like no other.
When striving for accuracy and efficiency of numerical data, there's no doubt that removing human error from the equation is one of the key benefits of AI. However, the absence of the human element is also one of its greatest limitations when it comes to planning for a client's future.
The personal touch
AI is revolutionising many industries, especially finance. Fraud detection has been used successfully for many years, as has task automation. Identifying sequences and detecting irregularities in transactions is one thing, but pre-empting the needs of an individual and planning for their financial future is another.
This is where it's crucial to remember that high-quality tax and financial advice requires more than basic number-crunching — it requires a thorough understanding of both the individual and personal circumstances of each client (which extend past data on a page).
A client's lifestyle, goals, aspirations, family dynamics, health challenges, attitude towards investment risk, work format and overall financial wellbeing cannot be represented numerically and, therefore, simply cannot be understood by even the most sophisticated AI programs. The empathy and personal touch that human advisers bring to the table are irreplaceable.
Emotional and behavioural bias
The human element is also critical when considering the emotional and behavioural biases that clients may have. Human advisers can recognise these biases and guide clients by presenting solutions that align with their long-term goals.
For instance, consider a conservative investor who is displaying nervousness due to heightened market volatility. Human advisers can mitigate reactionary investment behaviour through their sound relationship and emotional understanding of the client's approach to investment. The emotional support, intellectual guidance and professional reassurance a human adviser can provide cannot be replicated in any artificial intelligence application.
Regulatory challenges
Another challenge for AI in providing quality tax and financial advice is the regulatory environment. The strict regulations and legislation that govern taxation and financial advice are in place to ensure that clients receive fair and transparent advice. The ethical considerations that are made when formulating financial advice of any kind can only be successfully completed by human advisers.
For example, AI may recommend a tax strategy that exploits a loophole or a grey area in the tax code. The inability to perform sound judgement is one of AI's largest downfalls when it comes to regulatory compliance.
Make AI an ally
There is no denying that AI has the potential to transform the tax and financial advice industry. Directors and practice principals may quickly be left behind without considering how AI could play a part in their operations in the not-too-distant future.
Identifying where AI can best be used in your business can be the key to making it your ally. Practices as we know them today blend intellect sets from many different individuals to form collective intellectual property and a unique service offering. By introducing AI to the mix, the strengths of both artificial and human intelligence can be blended to enhance service offerings, accuracy and compliance outcomes and role satisfaction.
Finding the right balance between the accuracy, efficiency and automation that AI applications can bring to your firm and the emotional intelligence, lateral thinking capability and personal touch of human advisers can elevate commercial outcomes and ensure that your practice remains agile in an ever-evolving digital world.
Nik Lal is CEO and founder of Sherpa Financial Group.
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