AI: The Best Thing Since Sliced Bread, or a Fad?

Modern AI has been around for a few years now with ChatGPT launching at the end of November 2022. Engaging in the debate has been practically unavoidable given the press coverage on the topic. Even if you have not used the technology directly, more areas of life are starting to use the technology behind the scenes. Medical diagnostics, song composition, and transportation are just a few areas where AI is being used. Finance is no different.

As a quick example I asked AI to summarise the benefits of a UK pension in three sentences or fewer. I deliberately wrote my summary first not to be influenced by the AI output. Can you tell which is AI and which is human?

‘A UK pension provides tax-efficient savings for retirement, with tax relief on contributions. It offers the potential for long-term investment growth in a regulated environment. Additionally, it ensures a stable income in retirement, supplementing or replacing employment earnings.’

‘A UK pension allows an individual to save earnings for their future benefit, typically once they retire from work. To incentivise individuals in exchange for delaying spending of earnings, tax relief is granted on contributions, the savings grow tax free, and at least 25% of the accrued pension fund can be accessed without any liability to tax up to a threshold. In addition, there are a number of ways an income can be provided from a pension, allowing for a blend of flexibility, security, and tax efficiency to best meet an individual’s circumstance and preferences.’

Regardless of whether the first or second summary was created by a human or AI-generated, I was surprised by how similar the summaries are. Both essentially cover the same main points. To satisfy your curiosity, the first statement was AI. Perhaps the giveaway is that it is concise, about half the length of my statement. AI tends to be more efficient with words. Conciseness has its advantages, but AI potentially diminishes the richness of the English language. For some, further explanatory information may be needed to help grasp the points that can be lost in brevity. Simply put, information written by humans can be more interesting to read. This isn’t to say one is better than the other, but I would argue AI still has some way to go before it can interpret the emotional or intellectual needs of the audience. It would have to be told to write in a particular style rather than automatically adjust. I am sure AI will become much better at this in the future.

Factually, I would also disagree with one point in the AI statement. ‘It ensures a stable income…’. No, a pension does not ‘ensure’ a stable income. Where a pension is not secured and subject to investment risk, then a ‘stable’ income is definitely not guaranteed, even with the best advice. In many situations, a pension provides a consistent income, such as the State Pension, a Defined Benefit / Final Salary Pension or annuity. Call me a pedant, but I will argue consistent is not the same as stable as there is a connotation that stable implies sufficient. If that income falls short of the recipient’s needs, i.e. the recipient is not in a stable position, then I believe it is ambiguous at best to describe the income as stable. 

There are many debated dangers of AI, some we are probably not even aware of yet, analogous to some of the social media problems we are facing today that were never foreseen 20 years ago. Like most new technologies, there will be a dark side to its use, such is human nature. Overall, AI will be a highly useful tool and the global consensus is that it is here to stay rather than being a fad. Companies will need to embrace the opportunities that AI offers, or they may be left behind.

The extent of AI use will vary from industry to industry, but I fundamentally believe Financial Planning is about human needs. Therefore, advice relating to it is best understood and delivered by humans.  Critically, I do not believe AI can (yet) have empathy. However, many members of the industry are beginning to use AI to record and summarise meetings, and it will not be long before some firms use AI to draft advice letters and possibly emails. The key point is drafting, not sending. If AI can help reduce the time it takes to provide 75% plus of the relevant information in a communication, then it will be a great benefit. But, as my example has highlighted, the output is not entirely accurate and certainly lacks the nuanced explanation that my version supplies. AI has its limitations.

I believe human involvement in all communications, at least in our industry, will be fundamental to delivering advice… at least for the foreseeable future!