Can artificial intelligence fill the financial advice gap for investors?


Two in five Australians would like to get some sort of financial advice. However, formal advice is becoming more expensive.

AI could be the game changer that makes advice accessible to all of us.

An exodus of financial planners

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Over the last few years the financial advice sector has seen a mass exodus of professional talent.

According to Adviser Ratings, in 2019 Australia had close to 28,000 financial advisers. Today that number is below 17,200. And the rush for the exit may not be over yet.

Adviser Ratings predicts we could see just 12,000 advisers operating nationally by 2026.

This shrinkage reflects a number of factors.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry saw a major crackdown on remuneration and educational requirements across the advice sector.

The need for updated qualifications has seen some advisers rethink their future in the industry. At the same time, advisers are facing increased costs due to greater regulatory and compliance burdens. This is driving higher fees.

Adviser Ratings 2022 Financial Advice Landscape Report shows the dwindling supply of advisers has led to a 30% increase in fees over the last two years.

Consumers are looking at an average of more than $3240 for professional advice.

Fees of this magnitude are simply not affordable for many Australians.

Robo advice - the first generation

The good news is that technology is filling the gap.

From an artificial intelligence (AI) perspective, so-called 'robo advice' or automated advice, is the first generation of technology designed to help people invest.

It's a service that starts by asking consumers a series of questions. The responses determine which readymade portfolio of products (usually made up of exchanged traded funds) is recommended.

Despite the low cost of robo advice, it hasn't really taken off in Australia.

A 2019 report by investment watchdog ASIC found only 1% of people have used robo advice. This is likely to reflect the nature of automated advice as fitting people into a 'box'.

Stepping in to recommend share trades

Nonetheless, the Adviser Ratings report found growing numbers of Australians are keen to use technology to help with their finances.

One in five (18%) say they would like to use tech to trade shares.

Already, Jaaims has stepped into this space for sharemarket investors.

The Jaaims algorithm continuously analyses millions of data points across social media and market news, then overlays this data with stocks that demonstrate strong earnings and growth potential to deliver recommendations. What is particularly remarkable, is that all this data is updated every 15 minutes.

As we head into the future, technology will develop further, potentially reaching the point where we are able to chat with our computers for AI-driven share tips.

Until then, AI offers plenty of upside for investors.

It removes human emotions and biases, thereby raising the odds of success. It also relieves us of the need to comb through reams of sharemarket data - something most of us have neither the tools nor the time for.

On the flipside, what AI does not do, is take away choice or control.

Jaaims for example, makes recommendations, but the investor remains in the driver's seat at all times. And in our experience, that's just the way most investors like it.

Any advice provided is general in nature and does not take into account the viewer's specific needs and circumstances. You should consider your own financial position, objectives and requirements to determine the type of advice and products to best suit your needs. Jaaims Australia is an Authorised Representative of Jaaims Technologies, AFSL 519985.

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Tui Eruera is the founder of Jaaims, an automated trading platform that uses artificial intelligence (AI) to derive stock recommendations. He founded Jaaims in 2018. He holds an MBA from Deakin University.