Like every other industry, the history of financial services is full of fads and crazes, booms and busts and occasional innovations that stand the test of time. In recent decades, to name a few, we’ve had collateralised debt obligations (CDOs), contracts for difference (CFDs), Cryptocurrency and non-fungible tokens (NFTs).
The latest craze is Artificial Intelligence (AI) which has been around for decades, but is currently being reinvented and enthusiastically sold as the next big thing by its many commercial marketers. AI is likely to have increasingly important uses in areas such as scientific research, but the long-term and substantial worth of the heavily promoted “large language models” in the world of personal financial advice remains to be seen.
It’s most unlikely to be a “silver bullet”, but it may well lead to investors being better informed in simple and/or basic issues. In addition, there are many serious issues to be addressed, including privacy and ethical practices, such as in whose commercial interests a financial product or service is being promoted.
In the meantime, consumers should seek to understand what AI is (and more importantly what it isn’t) and remain sceptical about whether it can ever replicate the immense power of the brain and the capacity of human beings (as opposed to algorithms) to form trusted, personal and nuanced professional relationships.
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