Finance
AI is too ‘sociopathic’ to give financial advice, MIT researchers say
The problem with AI in the context of it being used as a financial advisor is that it is “inherently sociopathic,” according to a Business Insider article which cited an MIT research report.
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Why is AI sociopathic?
While human financial advisors give clients recommendations using a behavioral lens, since people don’t always make rational or unbiased financial decisions, AI can easily argue on both sides of an argument because neither side has any weight to it.
How is AI used by financial advisors at the moment?
Nearly 40% of human financial advisors use generative-AI tools for the job, according to a report from data-analytics firm Escalent, which added that this was mostly for boosting productivity, generating content, and for marketing functions.
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Examples include Canadian startup Conquest Planning using a financial-planning software with an AI architecture known as a blackboard system for storing information about tax rules, cash-flow mechanics, retirement-account structures, fiduciary rules, and more, according to the article, which added that another example would be Los Angeles-based wealth manager Arynton Hardy, who uses AI regularly to save time on data entry, portfolio monitoring, and other back-office tasks.
How can AI be made more useful for giving financial advice?
A method to make AI more empathetic to the client is by making it ask simple questions like “How are you doing?” before dispensing personalized financial advice, according to Andrew Lo, a professor of finance at the MIT Sloan School of Management and the director of the Laboratory for Financial Engineering, who co-authored the report.
The AI could also use audio or video from the client to identify emotional cues, like stress or fear, in their voice or facial expressions, he added.
“We think we’re about two or three years away before we can demonstrate a piece of software that by SEC regulatory guidelines will satisfy fiduciary duty,” the article quoted him as saying.
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Retirement is often associated with greater freedom and the opportunity to enjoy the rewards of decades of work. But for many people, the transition from earning a regular pay cheque to relying on pensions and savings can feel less like a gentle glide and more like standing at the edge of a financial cliff-edge.
A YouGov survey of 6,224 UK adults found that 55% reported that they were concerned about running out of money in retirement and, among these worried respondents, 63% were under 50 years old.
However, the good news is that avoiding a financial retirement cliff-edge isn’t about having extraordinary wealth – it’s about making informed decisions before and throughout retirement.
We spoke to Susan Hope, retirement expert and business development director at Scottish Widows, who shared the following nine practical steps to help you build a retirement plan that can weather life’s uncertainties and give you greater confidence that your retirement years will be defined by peace of mind rather than financial stress.
1. Understand what state pension and credits you are entitled to
“Make sure the cornerstone of your financial retirement income is covered by the state and you’ve got everything you’re entitled to,” advises Hope. “If you go onto the HMRC app you can find out really quickly when your state pension age is and what you are due to get.
“Another important thing to look at on the app is a year-by-year breakdown of your national insurance contributions.”
Hope recommends going back through your working years to make sure that you’ve got credits for every period because if you weren’t working due to unemployment, illness, or were caring for someone, you may be entitled to national insurance credits.
They help ensure you qualify for certain benefits, most notably the state pension, during periods when you weren’t working, were earning too little to pay National Insurance, or were claiming specific benefits.
2. Locate any lost or missing pension pots
“I have a huge bee in my bonnet about the £31 billion of untraced pensions that we have in the UK,” says Hope. “Go back through your LinkedIn or your CV and make sure that none of that £31 billion is languishing somewhere, because that is your money to have.”
Once you know the name of your previous employer or your old pension provider, you can use the government’s free Pension Tracing Service to help find lost pension pots.
3. Look at the UK’s different retirement living standards
“I think it’s really useful to look at the UK’s retirement living standards, because that will give you an idea of how much you’re going to need in retirement, depending on what type of retirement you want to live,” recommends Hope.
Regions Financial Corp. has completed its acquisition of Montgomery-based investment banking firm The Frazer Lanier Company, expanding its municipal finance and corporate investment banking services.
The Birmingham-based financial company announced Thursday that the acquisition has officially closed. Founded in 1976, Frazer Lanier provides investment banking services specializing in municipal and corporate securities and has served corporations, cities, counties and local boards throughout its history.
According to Regions, the acquisition is intended to strengthen the bank’s capital markets capabilities while enhancing services for public sector and institutional clients across its multi-state footprint.
Frazer Lanier has built its business by serving as an underwriter or placement agent for tax-exempt and taxable bonds, helping public entities and organizations access financing.
“Two of our top priorities at Regions Bank are strategically expanding our services and investing in top-tier banking talent,” John Turner, chairman, president and CEO of Regions Financial Corp., said in a news release. “By welcoming experienced bankers from Frazer Lanier to the Regions family, we are connecting Regions’ clients with even greater capabilities while advancing our long-term strategy for growth.”
As part of the acquisition, Frazer Lanier will be integrated into Regions Bank’s Capital Markets division within the company’s Corporate Banking group.
Brian Willman, head of Corporate Banking for Regions, said the two organizations share a similar approach to serving clients.
“Frazer Lanier has built trust by staying close to clients and helping them navigate important decisions,” Willman said. “Together, we can expand that model by bringing more ideas, more capabilities and more connectivity to clients across our markets.”
Regions said the acquisition will expand its municipal finance and investment banking capabilities, strengthen its services for cities, counties and other public entities, and provide clients with broader access to financing and capital markets solutions.
Financial terms of the acquisition were not disclosed.
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