Using AI without losing the human touch

Kimberley Dondo 00:00 – 01:11
Hello and welcome to this episode of Money Talks in association with Royal London. Today, we're discussing a topic that is completely impossible to ignore at this point: artificial intelligence. We'll explore where AI can genuinely help, where human judgment remains essential, and how firms are finding the right balance. But there's the question many advisers are wrestling with. How do you embrace automation without losing the personal touch that clients value most?

Technology continues to evolve rapidly, but trust remains at the heart of financial advice. So Royal London's recent Meaningful value in an artificial world research explored both adviser and consumer attitudes towards AI and revealed some fascinating insights. And I'm joined today by Colin Mitchell, Customer Life Stage Director from Royal London who will help dissect this research a bit better. Thank you so much for joining me today, Colin.

Colin Mitchell 01:12 – 01:13
Thank you for having me along.

Kimberley Dondo 01:14 – 01:30
So the research discusses meaningful value. Before we get into AI itself, let's start there. When clients talk about value from advice, what are they telling us matters most?

Colin Mitchell 01:31 – 01:58
So when clients talk about value, our research shows clients don't define value through just the technical aspects of financial planning or automation or efficiency alone. It's actually much broader than that. So, what comes through is value is consistently defined through trust, through reassurance, through the clarity and the confidence that the customers can achieve. And then that's on an initial basis, but also on an ongoing basis as advisers help them deliver their financial plan. So the technical aspects do matter. They are really important. But actually what comes through is the emotional needs definitely come to the fore.

Kimberley Dondo 01:59 – 02:14
Yeah, yeah, definitely. And with the research, was there anything that surprised you in particular?

Colin Mitchell 02:15 – 02:25
I was pleasantly surprised just how much the emotional elements stood out. I think we're all emotional beings. The importance of how we feel comes through really strongly. And I think the research just reminds us how important it actually is.

Kimberley Dondo 2:24 – 02:35
Well, especially with finances, it's kind of difficult to separate your emotions from your finances because I feel like that's heavily tied together.

Colin Mitchell 2:36 – 02:41
Definitely. Behavioural bias and behavioural economics, I think when you're making financial decisions is so important.

Kimberley Dondo 2:42 – 03:00
Yeah. And one of the most interesting findings is that consumers don't necessarily define value through efficiency alone. Why is reassurance still such an important part of advice? Is there a danger that firms become so focused on efficiency that they lose sight of what clients truly value?

Colin Mitchell 3:01 – 03:04
I'll try and answer that as two separate questions.

Kimberley Dondo 03:05 - 03:06
A two-part, yeah, sorry.

Colin Mitchell 3:07 – 04:13

So, I'll start with, I mean, first of all, I think financial planning is difficult. And I think people have got used to being great at budgeting. They can live within their means when they're getting a salary. And they can use that salary to save money for unexpected or more ad hoc events.

But I think as you transition to retirement and you actually start spending your savings, which is where a lot of the financial advice actually happens, I think the decisions feel much bigger and it feels like there's a lot of risk to consider. And I think it's the scale of the risk and that shift from being a saver to a spender that actually means trust and confidence and reassurance, that an advisers can bring become so important.

I think on your second question, I probably don't believe there's a danger that advice firms become too focused on efficiency. In all of my interactions with advisers, I think they're very clear how the relationship adds real value. And I hear a lot of advisers say to me that their clients share personal information with them before they've even shared it with their family members. So, it's quite interesting how it really is relationship-based and that personal, emotional and trust sort of relationship really adds value.

Kimberley Dondo 4:14 – 04:23
Yeah, definitely. It's very strange how we're able to kind of trust almost a stranger with big life decisions rather than our families.

Colin Mitchell 4:24 – 04:33
It is, isn't it? It is definitely how you want to be able to chat through with someone before you can actually, I mean, speak to your family members because you've got that fear of not knowing.

Kimberley Dondo 4:34 – 04:44
Yeah, yeah. And I think maybe people around you have a bias. So and you are aware of that. So you go to like an external person with the qualifications that you can trust.

Colin Mitchell 4:45 – 04:46
Definitely, so important.

Kimberley Dondo 4:47 – 04:53
So where do advisers expect AI to have the biggest impact in all of this?

Colin Mitchell 04:53 – 05:36
You have mentioned efficiency and I think most advisers can clearly see that AI can have a significant impact on the administration and the more technical elements of what they do. I think you can see there's lots of adoption of, say, tools that help record, summarise meetings and actually produce some suitability reports. And these are improving all the time.

I think firms are also looking at how they can do things like the fact-finding process, how to make that simple, how can AI use open banking, and in the longer term, probably open finance. So, I think you can see there's lots of practical things where advisers recognise that AI can help them and take some of that admin burden away and allow them to really focus on what adds value.

Kimberley Dondo 5:37 – 06:10
Yeah, yeah, definitely. That will free up a lot of time and probably free up a lot more time for them to spend with their clients, building that trust like we were talking about earlier. And one of the findings I found particularly interesting was around what advisers would do with the time AI creates, like we've just been talking about. So the assumption might be that firms would simply look for greater efficiency and profitability, but that's not actually what the research found, was it?

Colin Mitchell 06:11 – 06:40
No, not at all. I think the research really pulled out that advisers want to use any efficiency to actually spend more time with customers and to actually be able to deal with more customers. Customers with defined contribution pots of money where they need help making a decision coming to retirement continues to increase. And actually, having more advice capacity is only going to lead to better customer outcomes. So, it was brilliant for us to see that advisers wanted to spend more time with our customers. That's the key benefit of getting these efficiency savings.

Kimberley Dondo 6:41 – 06:48
Yeah, yeah, because yeah, that guidance is so important. I think that's primarily why customers go to an adviser.

Colin Mitchell 06:49 – 06:55
Definitely. It would be brilliant if we could use all these savings to actually help the advice gap and help more people get great customer outcomes.

Kimberley Dondo 06:56 – 07:21
Yeah, exactly. And the research also shows consumers remain cautious. Many people are still uncomfortable trusting AI to make important financial decisions. We all know that it can hallucinate and sometimes the information is outdated or incorrect completely. So, is trust the biggest barrier in adoption to AI?

Colin Mitchell 7:22 – 08:41
I think trust will be a barrier, and you can see in our research how important trust actually is. But I actually don't think it will be just one thing that actually slows the adoption of AI for what I would call full end-to-end financial planning. I think it will be a combination of factors that will result in people still wanting more traditional forms of support in that human where they go to for that confidence and that reassurance. I think the behavioural challenges of mentally moving from a saver to a spender, as I mentioned before, shouldn't be underestimated. I think the ability just to talk to someone to refine what's really important to them, simplify the goals that you have and get confidence in a plan. I think it's something where you're always going to want that human support to really question you and to really add that real value.

And I think when it comes to trust, people will trust the high-level information that AI provides, but will they trust the details when they have to actually take responsibility for implementing a decision? When you go to an expert or a financial adviser who is a professional and is fully qualified to do it, again, I think that, I mean, doing it myself and taking all that risk versus actually going to someone whose job it is to do that stuff, I think now, remains something that's really important to people.

Kimberley Dondo 08:42 – 08:49
Yeah, definitely. But where should human judgement always remain part of the process with this?

Colin Mitchell 08:50 – 09:19
I think it's always understanding what's really important to the customer is key. We're all different. We've all got our own dreams, we've all got our own ambitions. And actually, a big part of financial advice is how do you get that clear? Because if you really understand these goals, then you can actually create the right plan and give a plan that people are confident in to deliver what they actually want to achieve. So I think it's really keeping that emotional ambition, right at the heart of what we do.

Kimberley Dondo 09:20 – 09:57
Yeah, yeah. And I wanted to touch a little bit on that, you know, going from being a saver to a spender. I had a conversation recently about that as well, and realising that, within my own family, you know, my parents are probably getting closer to retirement age. And I would say that my dad is more of that person and he's always had an income. And whenever I talk to him, he says he's always going to work. Because I think there is that fear when you no longer have that income coming in. How can you start spending this that you've been conditioned your whole life, put money away, put money away, and now you're spending it? It's...

Colin Mitchell 09:58 – 10:16
Definitely, that fear of running out, right, actually means that people don't have the retirement they could really enjoy. I mean, because you end up with money left at the end, when reality is, we all know, we want people to have a great time at that stage in their life, right? And they deserve it after all the years they've put in for working.

Kimberley Dondo 10:17 – 10:18
Exactly. Yeah, I'm definitely going to be on as many cruises as possible.

Colin Mitchell 10:19 – 10:21
Me too.

Kimberley Dondo 10:22 – 10:32
And there's understandably a lot of excitement around AI, but there are also risks. What should advisers be cautious about?

Colin Mitchell 10:33 – 10:59
I think when you implement AI, you've got to think about what your risks and controls are within your firm, because they just become very different from managing what people were previously managing. You mentioned things like AI can hallucinate, can develop nuances over time. So, I think what's really important is whilst AI is super exciting and there's a real benefit from it, think about your business controls just so that you're really managing what AI does in a safe way.

Kimberley Dondo 11:00 – 11:15
Yeah, yeah. And some firms might view AI primarily as an efficiency tool. How can advisers ensure that any use of AI still supports good client outcomes and consumer duty requirements?

Colin Mitchell 11:16 – 12:02
Okay, so I think first of all, I would say efficiency is still really important because the last thing I would want is for advisers to turn away customers because they don't think they can be profitable. So I would encourage advisers to embrace AI where they know it's safe and where the appropriate due diligence has been evidenced. But if you look at it from a customer outcomes point of view, AI has got some great potential to look at data, to look at what customer actions that are being taken. And it can actually help advisers identify where there's some risk or where there's opportunities to get a better outcome. Wouldn't it be great if you could use AI to actually inform the advisers so they can have better conversations with their customers? So, I think AI's got great potential to really help get good customer outcomes, but it's about supporting advisers.

Kimberley Dondo 12:03 – 12:07
Yeah, yeah, as that like personal assistant almost.

Colin Mitchell 12:08 – 12:16
Definitely, right? So, you hear all about Agenta AI, you can have the personal assistant in your pocket. Imagine if an adviser's getting all that feed so they can have the real conversation with the customer. I think that would be brilliant.

Kimberley Dondo 12:17 – 12:32
Exactly. And finally, what will most successful advice firms be doing differently? And what's one thing advisers should do after listening to today's discussion?

Colin Mitchell 12:33 – 13:05
Okay, so I think I'd start with recognise what your customers really value. And obviously you can use our Meaningful value research to help with that. I would tend to say that then use AI to do all the things that customers don't value that are more mechanical, that are more administrative. And I would say embrace it.

I think from an adviser’s point of view, stay curious, understand what it is and isn't working. And then I think you don't need to jump in with two feet. You can start quite small. But what I would say is embrace that change and actually use it when it's safe.

Kimberley Dondo 13:06 – 13:18
Yeah, yeah. Well, thank you so much for speaking with me today, Colin. I think it's safe to say we can be cautiously excited about AI within Financial Services.

Colin Mitchell 13:19 – 13:29
Definitely. AI can definitely help us all make a big difference. And if we use it the right way to really help customers get great outcomes, I think it's an industry. We should all be proud of that.

Kimberley Dondo 13:30 – 13:59
Yeah. And if there's one message from today's discussion, it seems to be this. The future of advice isn't human versus AI, it's human plus AI, which, like we said, is that little personal assistant in your pocket. And technology can handle more of the administration. But trust, reassurance, and professional judgement remain
and at the heart of what clients value. So, thank you so much for talking with me today, Colin.

Colin Mitchell 14:00 – 14:02
Thank you very much for inviting me.