Why did you want to tackle the subject of AI financial advice in your research?
We’ve seen research exploring the numbers of people turning to AI for financial advice. This is interesting, but these studies only really give us half of the story. We wanted to get beyond the hyperbole and quantify how much money people are actually investing on the back of that advice. This would give us a sense of whether this trend presents a tangible risk of disintermediation for traditional financial services businesses.
The answer is probably ‘not yet…’ However, given the extent that all audiences, but especially younger ones, are investing suggests that the incumbent players shouldn’t get too complacent.
To put that in context: nearly one in nine (87%) of Gen Z and 83% of Millennials are using AI to ask financial questions, much higher than Gen X at 48% and Boomers at 27%. They are also significantly more likely to go to LLMs, with Gemini being the most used platform, as their first port of call for advice: around a fifth of Gen Zers and Millennials start with AI, compared to 5% of Gen X and a mere 2% of Boomers.
The figures only speak to the situation in the UK, so it would be interesting to see how this compares to other markets, given the opportunity. However, I would strongly suspect they are representative of other regions, notably North America.
What particularly surprised you in the findings?
It’s immediately clear that younger people have enthusiastically embraced AI, but what surprised us was that every generation is already investing quite substantial amounts on the back of AI advice. The average figure invested over the past 12 months is £2,350 – around $3,100.
While Gen Xers have invested the most over the past year, around £3,100/$4,130, Boomers are very close behind. This isn’t too surprising given these demographics are most likely to have disposable income. While Millennials and Gen Z are investing lower amounts (£2,200/$2,930 and £2,190/$2,920 respectively), they are more likely to have done so on the back of AI advice.
30% of Gen Z and 41% of Millennials (double the Gen X figure) have opened a stocks and share ISA or an investment account and younger people are nearly twice as likely to take higher risk investment choices, such as rapid growth consumer markets. By comparison, Gen X and Boomers are more likely to choose ‘safer’ options, such as sustainable agriculture.
How can you account for these trends?
I think it would be reductive just to suggest that younger people are simply more tech savvy, but there’s no doubt that investment has been democratised by smartphones. It’s now easy to download an app and invest small amounts on the back of free advice from friends, family, finfluencers and – of course – AI.
Low cost forays into stocks and shares offer a potential route for young people to hit their financial goals without having to rely on the ‘bank of mum and dad’ or manage the slow grind of side hustles, if they are prepared to take some risk – and it’s clear many are.
In light of changing tech attitudes, how can traditional financial service providers compete over the longer term?
It’s hard to compete with ‘free’ and instant and our research suggests younger audiences are pretty happy with the quality of advice they are receiving from LLMs, 83% of Gen Z and 89% of Millennials are satisfied. Interestingly, this compares to less than half of Boomers (45%) who have tended to invest higher amounts.
While this could present challenges for incumbent FS businesses down the line, it is also worth remembering that AI advice is entirely unregulated; something that LLM providers always highlight when you ask for financial advice.
The regulators are acutely aware of the risks this presents and this likely accounts for the revised FCA guidelines we’re seeing in the UK, which will allow retail banks and other FS providers to offer investment advice from April next year. So, I’d expect to see similar moves in other global markets too.
This presents a significant opportunity for traditional providers to better engage with younger audiences and counter the march of AI. The banks have made significant improvements to the customer experience across their digital estates, notably apps, in recent years in the face of competition from digital-first entrants. Now they need to make similar efforts to counter the big AI firms.
That said, the AI Pandora’s Box has been opened and it’s not going away now that people recognize the benefits. That doesn’t mean there isn’t room for both in the market, or indeed for financial businesses to make better use of proprietary AI engines.
There’s no question that traditional FS companies must integrate AI into their offer in some way. The challenge lies in how they position this given negative associations with AI, notably around hallucinations, after all brand equity is key in a sector in which trust and customer service are paramount.
So, the incumbents need to work out what role AI agents should play – and of course what feels right will differ from business-to-business. I suspect most won’t want to risk hard earned brand values, for instance by directing customers to self-serve AI platforms. The right course of action for most will be to use agents to handle the mundane jobs to free up more of their human specialists’ time to engage one-to-one with customers.
Author bio:
Sue van Meeteren co-founded Jigsaw Research, a multi-award winning international strategic insight agency with offices in London and New York, in 1998. It was acquired by STRAT7 to become STRAT7 Jigsaw in 2022. Sue focuses on understanding human complexity to drive strategy for organisations across the public and private sectors. Her specialisms include financial services, TMT and energy.
Company Bio:
STRAT7 is a global tech-enabled strategy, insights, and analytics group that leverages AI-powered technology and human expertise to help businesses stay ahead of change. With a fully integrated ecosystem of 400+ experts, we equip brands with the actionable strategies and foresight needed to navigate disruption, accelerate customer-centric growth, and achieve meaningful commercial advantage.
Our agencies include: STRAT7 Advisory, STRAT7 Audiences, STRAT7 Bonamy Finch, STRAT7 Crowd DNA, STRAT7 Incite, STRAT7 Jigsaw, and STRAT7 Researchbods.
STRAT7 is headquartered in London with offices in Amsterdam, Leeds, New York, and Sydney.
Sue van Meeteren co-founded Jigsaw Research, a multi-award winning international strategic insight agency with offices in London and New York, in 1998. It was acquired by STRAT7 to become STRAT7 Jigsaw in 2022. Sue focuses on understanding human complexity to drive strategy for organisations across the public and private sectors. Her specialisms include financial services, TMT and energy.
