Executives in the financial industry acknowledge the benefits and risks of AI, says report from One America News Network
June 28, 2024 – 5:32 AM PDT
CHICAGO (Reuters) – The spread of artificial intelligence-based systems offers big opportunities for financial services firms, executives say, but asset managers also face higher stakes than other consumer-facing businesses because they manage sensitive information.
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For example, AI systems could be better than humans at explaining to clients why they arrived at recommendations like portfolio allocations or lending decisions, said Zack Kass, a former head of business partnerships at OpenAI. People, he said, are not good at explaining subconscious biases that could affect such decisions.
“AI should make that a ton better. The problem is, if we’re not careful, it will just make it worse,” Kass said at an investor conference staged by Morningstar (MORN.O) this week in Chicago where the rise of AI systems was a frequent topic of discussion.
In theory AI, will simplify many routine tasks like filling out compliance forms or developing portfolios that are not so complex, leaving financial professionals more time to focus on human interactions or problems that require deeper thinking, said several investors and technology experts.
“There are some things that the machines could smooth over, and then a financial adviser could spend more time servicing their client,” said Karen Zaya, a Morningstar senior research analyst who follows investment managers’ use of technology.
But the depth of human interactions with AI will vary, she said. While AI-powered chatbots have become common for tasks like helping to choose an airline seat or to check a bank account balance, she said, the variables are much more complex for things like arranging investments in a retirement plan.
“I don’t think that’s on the agenda for the industry right now,” Zaya said. “All these firms we’ve spoken with are being very thoughtful and careful in how they implement these things. They want to be very considered.”
U.S. regulators are seeking public comments about the use of AI by financial companies, looking to promote inclusive and equitable access to their services. Treasury Secretary Janet Yellen warned this month that the use of AI in finance could lower transaction costs but comes with “significant risks.”
The spread of AI could tempt companies to cut jobs in areas such as at call centers or in software-development facilities, but it is still likely they will need human workers to handle more complex questions, said Margaret Vitrano, portfolio manager for ClearBridge Investments.
“AI could be used to develop code, but that doesn’t mean you lay off all your developers. Maybe you use it to develop the first pass of code, and then you still need someone who’s sophisticated and knows code to look at it and say, let’s think about the user experience here,” Vitrano said.
Brenda Ingram, a Chicago-based financial adviser, said she hopes AI systems could save time and expenses on preparing things like compliance reports.
“The mundane, if you can get the AI to do it, I think we’re going to like it,” she said.
Reporting by Ross Kerber and Suzanne McGee in Chicago; Editing by Jamie Freed
