AI Banking Advice and Workforce Transformation

The US economy is a “leveraged bet” on AI

The US economy has turned into a leveraged bet on AI, says the head of investment bank Lazard yesterday. “‘If you look at the sources of growth in the US, it is artificial intelligence and high-income consumers,’ Lazard Chief Executive Officer Peter Orszag said on the Bloomberg Deals TV show. Those consumers, he added, are also benefiting from the AI-driven growth in equities. ‘At this point, the US economy is a levered bet on AI,’ he said in the interview airing Wednesday. ‘Like many bets, it may or may not pay off, but it’s a good bet to be making’. The banking chief warned that the economy may face hurdles as companies and workforces adjust to the changes from AI. ‘Labor markets deal well with small shocks that happen fast or large shocks that happen slow — this could be a large shock that happens fast,’ he said.” Lazard was the advisor on this week’s $67 billion deal for NextEra Energy to acquire Dominion Energy as demand for power surges and pushes utilities to seek scale.

Watch for news in the coming weeks of some of the biggest IPOs in history, as Space X (now aiming to be an “AI in space” company), OpenAI and Anthropic prepare to launch as public companies.

Trust but verify – AI needs humans in the loop

The race to implement AI tools will tempt some players to cut corners, and in Europe the EBA (European Banking Authority) is meeting national authorities to ensure that people are providing adequate oversight of processes increasingly handled by AI, the EBA’s head of the digital finance told Bloomberg.  For example, “if AI is being used for credit assessments, these kinds of metrics, these results should be checked with humans,” Rita Merkeviciute said in an interview. Such oversight shouldn’t just happen at the end of a long chain of AI processes, but at numerous points along the way, she said. The more complex the AI model, the greater the need for human controls to ensure outcomes can be explained when the regulator comes knocking, she said. Reliance on third-party AI vendors will also be monitored, she said. Bhavi Mehta at Bain said he is talking to banks about potential liabilities if they rely too heavily on AI.

‘If you don’t have control and verifiability, if it gives the wrong outputs, you can be liable for significant exposure from a regulatory and compliance perspective,’ he said. ‘It is still in an experimental stage at most financial services firms,’ and ‘they have rolled it out in very narrow areas.’ If AI ‘deviates,’ for example, it’s important that a bank has a setup in which ‘a human can intervene,’ said Mehta. And while banks aren’t failing, the evidence suggests they’re still struggling with how to build AI into everyday operations so it can work at scale, he said.

What does emerge is the sense that AI businesses are trying to lock in clients as they hype around AI builds, while internally, bankers say the reality is that a huge amount of work has already been done around process automation. “J.P. Gownder, vice president and principal analyst at Forrester, says there’s still not enough granular data on how AI is altering the work bankers do. ‘Productivity statistics aren’t really showing us the kind of boom that would be required for companies to be replacing people with AI,’ he said. ‘By that I mean, in order for AI to replace lots and lots of people, you need fewer workers creating more value, and that automatically is going to translate it to a higher aggregate productivity rate’. For now, he says, ‘we haven’t seen that’.”

It matters how bankers talk about AI

How bankers talk about AI is emerging as an important theme in the debate about the future of employment and last week saw some big statements that didn’t all go down very well with the public. Stanchart chief executive Bill Winters earned a rebuke yesterday from former president of Singapore Halimah Yacob for describing workers who will lose their jobs to AI as “lower value human capital”. The negative reaction across social media in Asia, where Stanchart does most of its business, compelled Mr Winters to put out a conciliatory statement yesterday evening. “We will continue to invest in technology, platforms, and automation to improve how we operate, serve clients and position the Bank for long-term growth,” he said. “I want to be absolutely clear that the future of Standard Chartered depends on the talent, judgement, relationships, and commitment of you, our colleagues.”

“HSBC Chief Executive Officer Georges Elhedery warned that artificial intelligence will ‘destroy’ certain roles while creating others, urging employees to adapt rather than resist the technological shift,” reports Bloomberg, which noted that Elhedery’s tone was more “measured” that Bill Winters of Stanchart. “‘We all know generative AI will destroy certain jobs and will create new jobs,’ Elhedery said Wednesday during an investor and analyst session in Hong Kong. He emphasized the importance of keeping staff engaged, adding that employees should be ‘on the journey with us, not fighting us, not disenfranchised, not anxious, overwhelmed and resisting the change’. While Elhedery acknowledged the impending disruption, he said that HSBC is providing staff with training and coding assistance. The bank is currently deploying AI to accelerate client onboarding and enhance financial crime risk monitoring.” Analysts predict that AI could impact around 20,000 back and middle office jobs at HSBC by 2030.

In Singapore, Deputy Prime Minister Gan Kim Yong said this morning that banks and financial firms should be using AI to create better jobs and train workers for higher-value roles, not just cut costs. He was speaking at a DBS Leaders Dialogue event. The city state is positioning itself as an open market hub that can combine AI development with “institutional trust at scale”. DBS chief executive Tan Su Shan noted that AI could amplify Singapore’s small workforce.  "When firms implement AI, they should not only ask: how much cost can we save?,” she said. “They should also ask: What new roles can we create? How can existing workers be trained for them...?" She described the technology as a potential ‘great multiplier’. “‘Small amplified by AI means our limited workforce can now do many more things than we could before,’ Tan said, adding that companies needed to take employees and customers along because ‘humans matter’.”

Financial Advice & AIs

Anyone who has seen a doctor look something up on Google won’t be surprised in future to see financial advisors looking for help from ChatGPT or a similar LLM. A new study from Queen Mary College in London finds less than one in ten people has a high opinion of advice from financial professionals, which comes bottom of the list after social media, AI companies and friends and family. Top of the list is social media, where almost 40 per cent of respondents said they get their advice, followed by friends and family. Next on the list is AI companies, which as we wrote about last week, are definitely angling towards offering more professional advice. Then there’s the 9 per cent who use professional advisors. “Eileen Tipoe, a reader at Queen Mary University of London and author of the report, said that while some finfluencers created ‘great content’, ‘our findings show a clear gap between how influential financial guidance on social media has become, and the level of oversight that currently applies to it. While social media can improve access to information, the lack of consistent standards by the platform providers and disclosures means many users are exposed to guidance that would not meet basic quality expectations in other settings’.”

These finfluencers are not giving the type of advice you might get from a finance professional. (We’re not including financial journalists such as Martin Lewis who have mainstream media platforms.) Nischa Shah for instance is a leading UK-based finfluencer and chartered accountant with more than two million followers on Youtube. When we looked at her channel, we found her advice includes videos such as Five Side Hustles to Make You £1,000 a Week, and how to spot secret millionaires at your local coffee shop. (Apparently, “they don’t have weird energy”.) The world of crypto influencers is particularly biased, as most are pushing followers to buy one crypto coin or another, with a very small percent of sceptics including Ed Zitron. In many countries, financial advisors are regulated, and they charge a fee for their services. Influencers tend to operate on unregulated channels, and make their money by monetising views on TikTok, YouTube and other channels. As banks look to provide more advisory services and earn more fee income, the field of financial advice looks wide open.

ChatGPT Launches a Financial Advisor in Beta       

And as we hinted recently, AI companies are angling for this space too. Last Friday, ChatGPT beta launched its new personal financial advisor. “Today we’re releasing a preview of a new personal finance experience in ChatGPT to Pro users in the U.S,” said a notice on the OpenAI website. “Now you can securely connect your financial accounts, see a dashboard of where your money is going, and ask ChatGPT questions grounded in your financial context – all while staying in control of your data.” The chatbot gave an example of a user looking for a financial plan to help them start planning to buy a house in five years’ time. OpenAI is using Open Banking methods: it partners with Plaid, through which it can drink in all of your various financial channels, just as banks can do in several countries. Have a read here: it’s illuminating. OpenAI says that 200 million people ask ChatGPT for financial advice every month. Considering that people approach ChatGPT for everything from recipes to mental health advice, we can see this being a popular service.

A new personal finance experience in ChatGPT | OpenAI