AI-Human Teaming in the Finance Industry
Fear and uncertainty circle around AI Innovations. It's an understandable concern. The average person fears losing their job to a machine. Take it from a writer: I'm still here and kicking! AI is not heading towards human displacement. Instead, AI will enhance human work.
AI is not a replacement but an intelligent tool.
No matter how smart a tool is, you still need to wield it. In this article, we'll examine:
how AI is helping professionals in the finance industry,
why AI won't replace your advisor,
what the financial industry needs to do to embrace innovations.
But first, why should you listen to me?
I don't have any fancy acronyms behind my name or a master's degree in computer science.
I am a communicator. I specialize in simplifying complex technical solutions into engaging stories. I research and explain. I am fortunate enough to work in various industries, helping technical solution providers communicate concisely, clearly, and competently.
Why won't AI replace financial professionals?
AI can comprehend tremendous mountains of data. AI is faster than us. AI never tires, sleeps, or complains. However, those advantages are a double-edged sword.
AI excels at hard data. Hard Data is quantitative, measurable information. As Mihir A. Desai, professor of Finance at Harvard Business School, explains in his 2023 article, What the Finance Industry Tells Us About the Future of AI, "The hardest questions... are not entirely determined by hard data."
We as humans excel at soft data— qualitative information that is not easily measured. Humans think in shades of grey, while machines see black and white.
For example, AI could study a publicly traded company's stock prices. In theory, with enough information, it could forecast future short-term movements. However, a person understands the softer factors influencing a publically traded company. A financial professional can predict the consequences of long-term strategies. A financial advisor might know that upper-level management is toxic and not sustainable.
Which one will be more accurate? Only time will tell. Neither are full pictures in and of themselves. In truth, these two modes of thinking work better together.
When I say AI could theoretically predict future stock movements, I need to emphasize theory. Major financial players are investing in AI applications that could proactively indicate changes in the market. As of writing, that predictive capability is mirky at best. That example is to show a hard data extreme.
The best application of AI is to complement our weaknesses with its strengths and vice versa.
How will AI and humans team up?
According to Mihir, Asset Management is already experiencing disruptions from data innovation. Wealth Management and Lending are not as affected.
This makes sense because Asset Management has a lot of hard data. To train an AI, you need colossal amounts of data. Remember when I said processing tremendous amounts of data is a double-edged sword? There is less available data to train AI for Wealth Management and Lending. As we'll later discuss, those fields also require Humans' secret advantage over AI.
AI can help us by automating menial, mentally draining tasks such as data collection, analysis, and reporting. Most AI applications will probably be Back-end optimization.
For example, AI could overview compliance and quickly notify the relevant team members when something is out of compliance. AI can automate expense reports for faster reimbursement.
Secondly, AI can power advanced search functions by using natural language processing. You've probably played around with conversational AIs like ChatGPT. Imagine a mortgage underwriter hunting through their database for all the relevant information. Now imagine that same underwriter asking for the information casually and as plainly as a natural conversation. Except they are not asking a person, but their AI assistant. That digital assistant responds with all the relevant information within a second.
Thirdly, there are customer-facing AI solutions, but they are not unique to the financial industry.
What's currently in use?
JP Morgan's Capital Connect is an AI-powered platform that connects Investors with Startups.
Capital Connect is an excellent example of how organizing information speeds up decision-making. The platform uses AI to gather data from various sources. Sources such as multiple websites, Internet channels, and the regulatory documents all of these firms must file. It combines all that information into a standardized representation. Capital Connect boosts the exposure of startups, so investors don't have to hunt around.
Measured Risk uses AI to forecast supply chain disruptions so you can address the problem before it happens.
Remember in 2020, that familiar phrase, "supply chain issues?" Supply chains are complicated and thus vulnerable to disruptions. Measured Risk's AI-enhanced platform uses AI to assess over 3200 risk factors. It summarizes that data as key risk indicators. How resilient is your supplier? How secure are they? What is their lifespan compared to other suppliers? From that dashboard, you can decide how to mitigate these risks.
These are just two examples of fintech's current innovations. Both of these examples make hard data more accessible. You are still in control and, ultimately, making the decisions.
What about you? What skills will you need in the AI-powered future?
Ideally, AI will enable you to move away from time-consuming menial tasks like data collection. So you can spend more time interfacing with your clients and implementing decisions. You'll still need to be proficient in the financial fundamentals. You'll focus on business analysis, strategy, leadership, risk management, and negotiation.
However, as your business implements AI, you'll need training on using AI. Data interpretation will help you make sense of the data and help you spot anomalies.
As enterprises invest in AI, they must also invest in training. To embrace innovation, the finance industry needs to invest in its employees.
A tool's no good if you don't know how to use it.
What is our secret advantage over AI?
Empathy.
AI might imitate natural writing or our voices but not our emotions. All stakeholders in financial systems are ultimately humans. We evolved to be social and rely on human connection.
“Man is said to be a reasoning animal. I do not know why he has not been defined as an affective or feeling animal. Perhaps that which differentiates him from other animals is feeling rather than reason. More often I have seen a cat reason than laugh or weep."
~ Miguel De Unamuno, Tragic Sense of Life (1912).
Oh! And Communication— you'll need to learn to communicate effectively!
Perhaps the most important skill in the AI era is connecting with your target audience. Communicate in a way that is engaging, empathetic, and effective.