With the rise of robo advisors, automated portfolios, and intelligent algorithms, artificial intelligence (AI) is making an effective (and intimidating) incursion into the financial sector. Tasks that would have previously fallen to hordes of analysts are increasingly being turned over to digital processes, with remarkably efficient results. And unsurprisingly, this reality is fuelling a growing sense that finance jobs may soon fall to the implacable advance of AI.
Buttressing these fears, a recent study predicted that 230,000 jobs in the financial sector could vanish by 2025, swallowed by “artificial intelligence agents”. The shift seems to have begun already as the Bank for International Settlements reports. An increasing number of high-profile financial institutions are moving routine processes to digital workflows and cutting down on staff sizes to support a leaner, smarter operation.
But is AI here to take all the finance jobs away? I think not. While it’s unquestionable that AI helps refine, accelerate, and improve certain previously manual processes, it’s equally important to recognise that human agents bring indispensable qualities to financial relationships, and this is what digital transformation and AI experts call the “Human Factor”.
The Human Factor in financial relationships
I believe that the increasing presence of AI in finance is primarily attributable to the sector’s specific characteristics. For instance, accounting, audit, and finance are largely focused on numbers and rationality, and these are qualities that AI currently replicates with little difficulty. Consequently, studies conducted up to a decade ago – when AI had not reached the developmental stage it currently occupies – projected that up to 54% of jobs in finance could be lost to AI.
But concerns that AI will replace human financial advisors are premature, due to the unique and indispensable value-add that people bring to the financial sector. Yes, accounting and finance are mostly numbers-led, but they also require non-linear attributes, such as the gut instincts that precede placing a winning bet on a losing stock or the imagination to try an original approach and succeed where no one else has. And this, in my opinion, is the Human Factor that AI does not possess.
As described by AI experts SAP Insights, “AI is brilliant at automating routine knowledge work and generating new insights from existing data. What it can’t do is deduce the existence, or even the possibility, of information it isn’t already aware of. It can’t imagine radical new business models. Or ask previously unconceptualized questions. Or envision unimagined opportunities and achievements.”
AI lacks what physicist Michio Kaku describes as “intellectual capitalism” – “activities that involve creativity, imagination, leadership, analysis, humor, and original thought,” and this creates a world of difference between what AI and humans can do.
AI makes finance better, but only when combined with the Human Factor
Like most industries, AI has facilitated the financial sector’s most valuable and influential advancements in recent years. For an industry struggling beneath the weight of billions of daily transactions, all with hundreds of spinoff processes, the addition of automation has unburdened and liberated many financial operations. Resultantly, AI unleashed greater possibilities in the sector and is potentially leading finance into the future.
But it would be a mistake to assume that AI can do it all on its own. As one expert puts it, “AI can make decisions, but not subjective choices. Humans, on the other hand, are still the best at judging intangibles and superlatives amongst options that are objectively equal.” Therefore, combining the mechanical efficiency of AI with the intellectual capitalism of human agents presents the best opportunities to unlock the possibilities in the financial industry.