AI transforming the financial planning industry

By Linda Pan, Hunter Zhan, Jasmine Wei and Emily Deng

In November, College of Business team JEHL won the Hong Kong Undergraduate Financial Planners of the Year Award 2017. JEHL consisted of Linda Pan Minwen (BBA Finance), Hunter Zhan Chenkai (BBA Finance), Jasmine Wei Jiaming (BBA Accountancy) and Emily Deng Yuqian (BBA Business Economics). The contest was organized by the Society of Registered Financial Planners.

How to beat chatbots in the financial planning industry?

This was the question we faced.

We started our research on the current integration of AI technology with the financial planning industry, and devised our plan to govern AI and override chatbots.

Back in July 2017, there was news that chatbots in Facebook were getting out of hand. The bots were supposed to learn how to trade virtual objects with each other, but instead they began repeating words and nonsensical patterns. Facebook developers decided to shut them down. Public fear towards AI was beginning to rise. In a creepy preview of our potential future, mainstream media commented that AI was creating its own language.

Chatbots, as the name suggests, are a kind of computer programme which conduct conversation via auditory or textual methods. Some use sophisticated natural language processing systems, but many simpler systems scan for keywords within the input, then pull a reply with the most matching keywords from the database.

Leveraging chatbots

So, how should financial planners use chatbots? The main idea is that we leverage chatbot communication feature to streamline the financial planning process. The chatbot communication can help financial planners collect clients’ personal information, current position, goals and objectives, and sort the data for financial planners’ convenience. Then the planners can directly analyze clients’ goals and objectives, risk affordability and create a tailor-made financial plan. In addition, a chatbot can provide real-time feedback, such as informing clients about stock performances, returns and many other indicators.

Chatbots can also play a role as a relationship manager who keeps in touch with clients continuously, kindly asking “how is everything going?”, “have you prepared the fund for your children’s future education yet?” Through such “social” interactions, chatbots can facilitate data collection and processing in the financial planning process. It can also consolidate and even expand financial planners’ customer base.

Intelligent machines

Artificial intelligence, on the other hand, is an area of computer science which emphasizes intelligent machines that work and react like humans. Apple users may be very familiar with the greeting “Hey, Siri” to their iPhones. Those who like shopping online may notice the shopping recommendations given by platforms. Getting on a ride on the transportation network becomes much easier. These are typical applications of AI, attaining goals of reasoning, learning, knowledge, natural language processing, and so on.

A chatbot is just one of the applications of AI in the financial planning industry. Other than that, robo-advisors work with investment and portfolio management, and can also predict financial shocks. Pefin, a company that has been using AI to replace financial advisors for some time, enables easier access for ordinary people to get help at a much lower cost.

Game changer

The question of “how can we govern AI” follows naturally. From the perspective of financial planners, three main challenges and solutions are presented here.

First, with the integration of AI into the current system, new types of fraud may be introduced. Possible solutions would be to set up AI auditors and an AI regulatory body. Second, the data security problem is growing, and the corresponding responsibility for financial planners is to measure the quality of data preservation in terms of integrity, availability, and confidentiality. Third, in the future when increasingly autonomous AI enjoys the same legal rights as us, how can it be justly punished in the same way as humans? The primary suggestion here is to take the punishment of corporations as a possible reference in further research.

Looking back, it seems like AI is a split new concept. However, surprisingly, the discussion has existed since 1955, when the term was first coined by John McCarthy. Taking it more calmly, are we now in a bubble or facing real challenges?

Instead of panicking that AI is going to replace the job of financial planners, we should take the initiative to become domain experts and get more involved in the development of AI to make it something that can really improve service quality. In this coming evolution, we can be one of the game changers.