New findings from FINRA: Investors Show Affinity for Advisors over AI Generated Research

FINRA’s research involved presenting consumers with specific pieces of information. Some consumers were told that the information came from a financial professional, others that it came from an AI generated search. FINRA was then able to ascertain specific details about trust in AI based on either the type of information (homeownership versus stock prices) or the demographics of the consumer (race, gender, self-assessed financial savvy).

AI produces more than research results, sometimes it generates distrust. Lately, the news seems dominated by stories about disappointing results from AI-based companies. In the race to keep up with AI advancements, it seems like financial advisors just got a power boost. In early June of 2024, the FINRA Investor Education Foundation reported new research suggesting consumer trust favored financial professionals more than AI in terms of financial information.

We’ve been tracking this trend for a few years now. Back in September of 2023, we noted that AI can provide benefits to advisors: “AI can be a partner that can help financial advisors respond more quickly to events. By shifting from a single shot strategy session to address trends and threats to a continuous learning one (by using AI), advisors can more readily spot potential events or problems and respond to them more quickly.”[1]

We also noted research from the Wall Street Journal that indicated AI managed portfolios underperformed their human-managed competitors. “…[A]cting to undercut AI is its performance. New reporting from the Wall Street Journal indicates that of the trading funds that use AI to manage portfolios, almost all of them are underperforming.” We also noted that tipping the favor towards advisors over their robot counterparts is that clients simply favor humans. We noted consumer experience with AI driven results with Amazon and other common commerce platforms. “Having a human on the other end of a computer program to take note of unusual activity can prevent an oopsie. Knowing that there is a human on the other end of a computer can build trust in using that system among investors and others.”

New research from FINRA shows that many investors distrust investing information when they believe it is generated from AI. “In a recent study, five times as many consumers indicated they were more concerned than excited about AIthan indicated they were more excited than concerned.”[2] Consumers specific concerns include privacy and personal information hacking. But FINRA’s research did more than merely survey the thoughts of consumers. Instead, it ran its own experiments.

FINRA’s research involved presenting consumers with specific pieces of information. Some consumers were told that the information came from a financial professional, others that it came from an AI generated search. FINRA was then able to ascertain specific details about trust in AI based on either the type of information (homeownership versus stock prices) or the demographics of the consumer (race, gender, self-assessed financial savvy).

The results showed a clear pattern of higher trust in information related to homeownership  when it came from a professional. “A larger proportion of respondents trusted the information on homeownership when they were told a financial professional had provided it, and more distrusted it when we cited AI as the source.”[3] This was less pronounced when it came to stock and bond performance There, trust in the information was about equivalent between the two sources of information. However, the demographics of who trusted AI generated information showed some patterns: “A greater proportion of men trusted the investing information when they were told it came from AI (37 percent) rather than from a financial professional (27 percent). Similarly, a larger proportion of white respondents trusted the information when AI was cited as the source (34 percent) compared to a financial professional (30 percent).”[4] Lastly, the amount of self-assessed financial knowledge was also a distinguishing factor in the amount of trust placed in AI information about stock and bond performance. Those who felt that they had less financial knowledge were more likely to trust an advisor over AI than those with greater levels of financial knowledge.

Advisors may want to consider how they share the origin of information they present to their clients: whether it comes from their own research or AI. The CFA Institute Research and Policy Center, an organization that studies issues impacting advisors, has suggested an open coordination between AI and advisors.[5] But, an additional complicating factor may be the increasing use of unauthorized AI at work by those assisting advisors. As we noted in May of 2024, “[m]ore than three-quarters of employees using AI admit to bringing their own AI tools to work.”[6]

[1] https://www.bcgbenefits.com/blog/ai-cant-beat-the-human-touch

[2] https://www.finrafoundation.org/sites/finrafoundation/files/the-machines-are-coming.pdf

[3] https://www.finrafoundation.org/sites/finrafoundation/files/the-machines-are-coming.pdf

[4] https://www.finrafoundation.org/sites/finrafoundation/files/the-machines-are-coming.pdf

[5] https://rpc.cfainstitute.org/-/media/documents/article/industry-research/unstructured-data-and-ai.pdf

[6] https://www.bcgbenefits.com/blog/unauthorized-ai-at-work

These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.

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