The Role of Artificial Intelligence in Personal Finance

The Role of Artificial Intelligence in Personal Finance

For those looking to grow their wealth there have always been pitfalls and minefields to negotiate as well as advantages which can come with the help of professional finance experts. Now, with the growth of tech tools such as robo advisors and artificial intelligence, it is possible to do away with financial advisors altogether and place your trust in the new technology.  

What is a Robo Advisor?

Established in the US in 2008, a robo advisor is a software algorithm which automates the process of choosing investments for you. This is a concept which can take out the complexity around investing by first having you complete a questionnaire, which is designed to help the robo advisor understand your finances, your goals and aims, and your risk tolerance. Having done this, should you wish to proceed the robo advisor will then choose a portfolio of investments for you.

A robo advisor will often be less expensive than a financial advisor. Typical fees are around 0.25% – 0.50% of your assets against an average 2.4% of your initial investment plus 0.8% annually charged by a financial advisor. Some robo advisors charge a monthly subscription fee instead and some will appear to be charge-free. However, read the small print because quite often this will only apply to limited balances.

For tech-savvy investors, there is now a new kid on the block and that is artificial intelligence (AI).

The Rise of Artificial Intelligence in Personal Finance

It seems that suddenly AI is everywhere and is being talked of as both a disruptive, even dangerous force and as a force for good. One of the areas in which it has really taken off is in personal finance where it is able to improve decision making and automate procedures to make them easier to understand.

AI Tools for Savings and Investments

AI-powered platforms work initially in the same way as robo advisors by evaluating your financial data and risk tolerance in order to work out the best and most appropriate investment or savings plans for you. They can help you to save more easily and regularly by automatically putting aside a percentage of your salary or by rounding up transactions to build a savings pot.

AI can analyse the financial markets alongside your individual preferences in order to keep you on top of the best investment and savings rates. This can help to manage and increase your wealth automatically.

By analysing your individual requirements, spending patterns and financial assets, AI-powered platforms can offer, should you wish, personalised suggestions on debt management, budgeting and retirement planning.

AI-powered Fraud Detection

AI is increasingly utilised in fraud detection in personal finance. It is able to detect unusual behaviour by monitoring accounts and transactions to generate fraud alerts in real time, before any fraud is committed. By using speech and facial recognition tools, behaviour analysis and biometric authentication AI can improve the security and safety of your financial information.

Should you entrust your finances to robo advisors or AI? These technologies are undoubtedly clever and becoming easier to use. However, they are not without issues. The key is to do your research before committing to any form of outside financial management.

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