Is the World Ready for AI Financial Advisors?

Jonathan Simnett

Is the world ready for AI financial advisors?

Machines are faster than humans at making calculations. They can be more perceptive. They’re certainly more reliable. The phenomenon of machine learning means that their performance will only improve. We let machines tell us what to watch and what to buy. We have been letting them operate trains for some time now and we appear even about to let them drive us around on the roads.

However, when it comes to something highly complex and deeply personal, such as looking after money, are people ready to trust a machine over a human being? The signs are that as financial services providers look for better, more cost-effective and compliant ways to serve their customers, chatbots have become commonplace in retail financial services. As these are accepted, the emergence of AI-powered financial advisors and investors is happening as fintech companies offer ‘robo-advisor’ services.

So, what’s involved and are we actually ready to give the ‘robots’ control over our money?

The rise of AI financial advisors

Automated financial advisors and investment services have existed since 2008, but they are relatively basic. In most cases, they have been little more than chatbots asking questions of customers to respond to questions and direct them into pre-existing investment funds.

In 2017, companies began to harness AI in the form of machine learning to improve their offering. Pefin claims to be the first company in the world to offer financial advice with AI. Its AI tracks between 2 and 5 million data points, including rule changes and market moves, to provide real-time information to its customers.

Others have followed, using a combination of deep learning, big data and quantitative finance to offer financial advice over and above what was traditionally available.

Advantages of robo-advisors

AI financial advisors are growing in popularity because of the many benefits they bring to their customers and service providers alike.

Firstly, they have the potential to give more accurate advice, on a broader range of options, more quickly than human beings. In the blink of an eye, these machines can weigh up the potential returns of complex funds and convey this information to the investor. Machines will also be able to quickly find the fund that offers the best return for the least amount of risk. This could be a game-changer in the investment field.

There are even companies like MortgageGym, which aim to bring robo-advisors to the masses in a drive to alleviate homebuyers’ stress and uncertainty when applying for a mortgage. MortgageGym closed a £3.8m funding round from investors including LSL Property Services in September 2018, bringing its valuation up to £12m.

Secondly, robo-advisors offer a quick and easy online user experience to their customers that fits more easily with their lifestyles. Companies like Pefin aim to open up the world of financial advice to more people, democratising access to financial advice.  They seek to make finance easier to understand, with less complicated terminology. Their goal is to enable customers to pick the investment vehicle that is right for them, rather than the one their human financial advisor recommends.

Disadvantages of AI Financial Advisors

Of course, it is still very early days for AI financial advisors. Most companies have been trading for less than a year and they have not built a proven track record yet. so it’s understandable that investors may be reluctant to trust machines with any of their money at this point.

Demographics pose a challenge too. People aged 50 or over, who own 70% of wealth, are likely to be more reluctant than Millennials to trust robots to give them advice on how to plan for their retirement.

Humans will always have certain advantages over robots when it comes to giving advice. Humans use empathy when giving advice, which can help save investors from their greed or bad ideas. When life’s events affect your finances, or your goals change, it could be that a human is better at helping you adjust and plan.

Finally, a human beats a machine at explaining what they’re actually doing with your money. When people spend time with a financial advisor, they learn about how investments work. The ‘set it and forget it’ nature of AI-powered financial advice eliminates this education.

A happy medium

In the real world, it’s unlikely that AI Financial will make human financial advisors redundant anytime soon. As in virtually all fields of technology application, what’s most likely to happen is that AI will combine with a human element to serve the customer optimally and create new areas of expertise. Tech will be there to find the best opportunities and execute them smoothly. Humans will be there to provide the bigger picture and the personal touch.

Here are some AI financial advisory companies we’re currently watching:

Wealth Wizards – AI-Powered pension advice


MoneyFarm – Wealth Management & Online Investments Platform


Cleo – an intelligent assistant for your money.


Mojo Mortgages – Free online mortgage broker powered by AI

If you would like to find out more about the future of the fintech industry and how fintech innovation is driving billions of dollars of M&A activity, download the Hampleton M&A market report today.

Jonathan Simnett, Director at Hampleton Partners, tech M&A dealmarkersJonathan Simnett,  Director & Sector Principal

Jonathan has been involved in the technology business for over three decades, founding, managing and turning around businesses and helping management and their investors in fast-growth technology segments to grow, manage change, enter markets, transfer technologies, acquire, merge and sell.

He holds a Master’s degree in Science and Technology Policy from The University of Manchester, attended the Stanford Graduate School of Business and blogs on technology innovation, marketing and management at “The World According to WestFour”.