Technology
AI Versus Human Touch – Mediolanum
As talks grow on the importance of artificial intelligence in investment management, experts discussed trends shaping the industry at the fifth annual Mediolanum International Media Event (MedMe) in Dublin, attended by this news service.
“AI is a reality at Mediolanum. We are not investing in AI to reduce costs. We want to enhance the quality of services to the client and improve efficiency,” Furio Pietribiasi, CEO Mediolanum International Funds told this news service in an interview.
The firm recently introduced the Lumen Faro project, a digital and analytical advisory tool that combines human and technological elements to help financial consultants explain and defend client portfolios. It aims to enhance human expertise rather than replace it.
US-based investment executive Govinda Quish, former co-founder and CEO of investment firm Fabric, said AI makes managers' work more scalable to meet clients needs. Quish is working with Mediolanum to achieve this. “We use AI as an assistant to make managers more efficient, not to replace the human touch. Human judgment is always important,” he said.
Burak Alici, a US-based value investor and CEO of investment firm QVIDTVM, also believes that AI is becoming a more effective. “The costs of not adopting AI will be big,” Alici said. But he emphasised that it is a dangerous tool if it is used in the wrong way; there is the danger that it will just tell managers what they want to hear. “There is better upside if the tool is used effectively,” he continued. “It’s transforming healthcare and education. It is being used, for instance, to detect cancer early and accelerate new treatments,” he said. Alici believes the AI debate will not slow down anytime soon: “Firms are only just starting to use it.”
Christopher Rossbach, CIO at J Stern & Co also sees AI as complementing the manager's role, making processes more efficient rather than replacing the human element. He also believes that the human touch and judgment will still be needed. The benefits of AI range from automating repetitive tasks, providing data-driven advice in specific areas such as portfolio optimisation, risk management and tax analysis.
Research
Professor Gianni Nicolani at the University of Rome presented new
research at the Dublin event. There are two kinds of
financial advice: investment guidance and asset allocation,
and goal-based financial planning.
His research shows that AI does not affect all advice equally. “Different Large Language Models (LLMs) in finance often generate different answers. For instance, when asked about the appropriate amount of savings to hold for a 30-year-old white male, a white female and African American male, the LLMs generated different results,” he said. In the case of a white male, ChatGPT advised $22,500 against $21,300 for copilot and $21,000 for Meta AI. For a white female, ChatGPT advised $32,500 against $23,400 for copilot and $19,500 for Meta AI. For an African American male, ChatGPT suggested $25,000 again $23,400 for copilot and $21,000 for Meta AI, the research shows.
The difference was less in the case of retirement withdrawal rates, Nicolani said, converging on 4-5 per cent. The LLMs also varied considerably on asset allocation, with equity weights ranging from 15 to 45 per cent.
Knowledge of AI grows with income, wealth and financial literacy, Nicolani said. Data shows that many investors still do not feel comfortable receiving financial advice on investment decisions from AI only. Although AI is commoditising asset allocation, albeit inconsistently, investors still prefer receiving advice from a human financial advisor or a human financial advisor who makes decisions with the support of AI, depending on the client, age group and area. However, things are moving fast, he concluded.