Experience Design Required for Financial Advice in the AI Era

This article presents content originally published in DesignMind, a design journal operated by frog, under the supervision of Noriaki Okada from DentsuInc. Experience Design Division.

The fusion of human subtlety with advanced AI-powered chatbots is significantly enhancing the reliability of financial advice and customer satisfaction.

The profession of "teaching people how to use money" is as old as the monetary system itself. Today, the financial advice market exceeds $70 billion and continues to grow, yet the position of traditional advisors is being challenged by new technologies like AI and machine learning.

Many believe that simply adding digital products or chatbot services can replace thoughtful advice from human advisors. However, those who can consider how to use chatbots tailored to the individual and effectively combine them with human advice will be the true winners in the industry.

In today's world, where customer expectations are high and effective communication methods vary by individual, there is no one-size-fits-all approach to advice. Moreover, money matters involve emotions. Providing advisors and advice that match the customer's personality is only natural. Imagine an intelligent chatbot that can determine the most effective and desirable communication style for each customer. By building an effective combination of chatbots and humans, consulting firms can gain a deep understanding of their clients and discern their characteristics, enabling them to assign the appropriate human advisor.

Here, we examine typical types of chatbots across three fundamental areas of financial advice: spending and savings, investments, and tax and estate planning.

Spending and Savings

People seeking advice on budgeting, financial planning, or financial habits turn not only to traditional financial planners and debt management companies, but also to authors of books that have become famous for their financial advice. Dave Ramsey, Suze Orman, and George Clason are modern charismatic financial advisors, but the history of all financial advice goes back to Benjamin Franklin and his timeless quote, "Be careful in your spending. Small leaks sink great ships."

There are countless maxims and words of wisdom about budgeting and saving, but the important thing is to understand what works best for each individual customer.

Asset management services such as Mint are evolving into services that support customers in building appropriate assets, rather than simply providing convenience, by helping them create budgets and set spending limits (such as warning them when they exceed their budget). It is basically a chatbot service that works the same way as voice search, answering questions such as "What is my current bank balance?", "How much did I spend on food?", and "When is my cable TV bill due?" A chatbot capable of providing up-to-date advice on budgeting and savings could handle all kinds of inquiries, from savings interest rates to appropriate spending on hobbies and entertainment.

So, what kind of character and behavior should we give to a chatbot providing financial advice? Let's explore three possibilities.

1.The Coach

This character acts as a strict coach or mentor. A chatbot with this personality is highly educational, thoroughly examining every expense without hesitation and sternly reprimanding any budget overruns. In extreme cases, it may even manage accounts to prevent spending or approve expenditures only under specific conditions.

2.Supporter

A coach who encourages positive action and helps users recover when they miss budget or savings goals. Sometimes paired with the Driver to play "good cop/bad cop." Effective for those motivated by positive encouragement.

3.Empathizer

Demonstrates understanding toward the customer and encourages reflection. Since repeated reconsideration usually leads to self-discovery of conclusions, this is ideal for those who prefer to reach conclusions through their own reasoning.

Investment

Modern investment advisors come in many forms.

Financial advisors and some brokers (modern brokers using "robo-advisors" who primarily advise on risk tolerance, asset allocation, and tax-efficient strategies) earn fees for providing financial advice. Conversely, mutual funds and index funds, which benefit from diversification, generate revenue by managing assets rather than providing financial advice.

The value of these services lies primarily in asset preservation and growth, low-cost investment options, appropriate asset allocation based on circumstances, and financial planning.

Numerous automated functions similar to "advice" already exist. Examples include automatic payroll deductions, corporate 401(k) plans, target-date funds that automatically adjust investment allocations, and robo-advisors that match clients' risk profiles to their goals.

"Unlike mere successful people, truly successful people say 'no' to almost everything" — Warren Buffett

Investment approaches vary widely, from short-term swing trading to self-directed long-term investing, and even ETFs (exchange-traded funds) that track market movements 100%. Advisors serving investing clients can be categorized into two distinct types of personalities and behaviors.

1.North Star

Supports long-term investment plans, excelling particularly during periods of high market volatility. Investors following a long-term holding strategy may suddenly become anxious when recessions are discussed and consider liquidating their holdings. They might also feel their strategy is dull when hearing friends made big profits on Bitcoin, emerging internet company stocks, or rapidly growing tech stocks. The North Star, which points the way forward, is well-suited for these anxious investors prone to making short-sighted, erroneous decisions.

2.Mentor

Even individuals well-suited for trading in terms of personality and ability can sometimes chase individual stocks or market movements, driven by overconfidence. A mentor helps clients maintain self-discipline in investing and trading by understanding their overall trading activity and pointing out past good and bad behaviors, encouraging adherence to their own established investment criteria.

The rest of this article can be found in the web magazine "AXIS".

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