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AI in financial services: how AI is shaping the future of advice

5 mins read
by Unbiased Team
Last updated January 30, 2025

Learn how AI is transforming financial advice and services. Discover AI chatbots, personalised financial planning tools, and how AI complements advisers.

Explore the benefits and limitations of AI in financial services and what it means for personalised client advice.

Key takeaways
  • 75% of UK financial services firms already use AI technologies, with predictive AI widely adopted for risk assessment.

  • Tools such as robo-advisers, budgeting apps, and AI-based chatbots are making financial guidance more accessible.

  • While AI offers efficiency, it lacks the emotional intelligence and nuanced judgement that human financial advisers bring.

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What is AI in financial services?

Artificial intelligence (AI) refers to the ability of machines to mimic human intelligence, performing tasks such as analysing data, solving problems, and making decisions.

AI in financial services has become a cornerstone for improving operations, providing personalised customer experiences, and delivering accurate insights.

The adoption of AI for financial services in the UK continues to grow rapidly. A survey on AI in UK financial services conducted by the Financial Conduct Authority (FCA) found that 75% of firms in the financial sector already utilise AI. 

Among its various applications, predictive AI stands out, with 91% of institutions employing it for crucial tasks such as detecting fraud and assessing risk, according to a report by UK Finance. These advancements demonstrate how AI is reshaping the industry.

Looking ahead, the UK government anticipates that by 2040, 1.3 million businesses will integrate AI into their operations, with an expected adoption rate of 34.8%. These projections highlight the pivotal role of AI and financial services in driving innovation and shaping the future.

What are some examples of AI applications in financial advice?

AI applications are becoming more important in financial advice, although their current use among financial advisers varies. 

Personal finance management

AI-driven budgeting apps and financial planning platforms have made managing money significantly easier. 

These tools analyse spending patterns and generate tailored recommendations for users. For instance, an app powered by AI financial services might alert users to overspending in specific categories or suggest strategies for saving for a significant purchase. 

Algorithmic trading and robo-advisers

Algorithmic trading relies on sophisticated AI systems to execute trades by analysing market trends in real time. 

Similarly, robo-advisers harness AI to develop and manage investment portfolios. These platforms assess factors such as risk tolerance, financial goals, and time horizons to create personalised strategies. 

Robo-advisers offers a low-cost, automated approach to investing that is ideal for beginners and those with straightforward financial goals.

However, human advisers can offer tailored guidance throughout your life, adapting to your evolving circumstances and offering expertise on various financial matters.

AI-based chatbots

An AI-based chatbot has become a common feature in financial services. These chatbots assist users by answering basic queries, providing reminders, and guiding them through processes.

For example, a chatbot might explain the steps needed to start an investment portfolio or clarify the differences between savings and individual savings accounts (ISAs).

How is AI transforming financial advice?

AI is revolutionising how advisers deliver value to their clients. By combining the strengths of human expertise with AI, financial advisers can offer a more efficient and personalised experience.

AI tools, such as data analytics platforms, evaluate vast amounts of information to uncover investment opportunities tailored to individual client needs. For example, these tools can analyse spending habits, credit histories, and market trends to suggest relevant financial strategies. 

Chatbots, powered by financial advice AI technology, can handle routine questions, freeing advisers to focus on more complex issues. Additionally, AI-driven risk assessment and portfolio optimisation tools ensure clients’ investments align with their objectives.

Some leading platforms illustrate how AI and financial advice work together effectively. 

Robo-advisers such as Nutmeg use advanced algorithms to deliver automated portfolio management, while other tools provide financial advisers with actionable insights that enhance decision-making.

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What are the pros and cons of using AI financial advice?

Financial advice AI has both advantages and disadvantages.

The pros

  • Time-saving for advisers: Routine tasks such as data processing and analysis can be automated, allowing advisers to dedicate more attention to their clients.

  • 24/7 availability: Tools such as financial adviser chatbots ensure clients receive support at any hour, eliminating the wait times often associated with human assistance.

  • Cost-effective solutions: AI offers affordable options for basic financial guidance. For instance, robo-advisers provide investment management at a lower cost than traditional services.

  • Personalisation at scale: By analysing extensive datasets, AI can deliver some financial guidance. Platforms can recommend investments based on an individual’s risk tolerance, income level, and financial goals.

The cons

  • Limited understanding of personal circumstances: AI tools rely on data but cannot grasp the subtleties of a client’s unique situation in the way a human adviser can.

  • Lack of emotional intelligence: Machines cannot provide empathy or reassurance, which is often critical when discussing sensitive financial matters such as retirement planning.

  • Potential data security risks: Using large volumes of personal information introduces the risk of breaches and raises privacy concerns.

  • Ethical challenges: Decision-making algorithms can inadvertently produce biased or flawed outcomes, raising accountability questions.

Although AI delivers convenience and efficiency, it lacks the emotional intelligence, judgement, and personal connection that human advisers bring.

These qualities are essential for addressing complex financial needs and building the trust necessary for long-term client relationships.

Will AI replace human financial advisers?

AI is a valuable ally, not a replacement, for financial advisers. It excels at processing large datasets, identifying patterns, and automating repetitive tasks.

However, the expertise and interpersonal skills of human advisers remain unmatched. By using AI for financial services, advisers can enhance their efficiency and focus more on the quality of their advice.

The future likely lies in a hybrid approach, where tools like an AI-based chatbot complement financial advisers by handling basic queries and administrative work. This collaboration allows advisers to provide faster, more accurate insights while maintaining the personal touch that clients value.

What is the future of AI in financial advice?

The future of AI in financial advice includes innovations such as generative AI and predictive tools. According to a UK Finance survey, 70% of financial services firms are piloting generative AI to improve automation, sales, and customer service.

Additionally, 75% of firms expect significant benefits in productivity and operational efficiency rather than in revenue-generating activities. These advancements will likely lead to financial advice becoming more personalised and widely accessible.

However, the evolution of AI and financial services must also address critical challenges. Regulators are focusing on transparency, accountability, and data security to ensure AI systems operate ethically and responsibly. 

For advisers, integrating AI offers an opportunity to enhance their services while adhering to ethical standards. By balancing innovation with human expertise, the financial industry can build a future that benefits clients and advisers.

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The blend of cutting-edge technology and human expertise is shaping the future of financial services. While AI enhances efficiency and accessibility, human advisers remain indispensable for their empathy, nuanced judgement, and ability to navigate complex financial situations. 

By embracing AI as a supportive tool, the financial services industry can create a more personalised, efficient, and client-focused approach that meets the demands of a dynamic and digital future.

Let Unbiased match you with a professional financial adviser who can provide personalised guidance supported by the latest advancements in AI.

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Author
Unbiased Team
Our team of writers, who have decades of experience writing about personal finance, including investing, retirement and pensions, are here to help you find out what you must know about life’s biggest financial decisions.