1091. Insights: Can AI make us financially healthier?

0:14Ross Gallagher:Hello and welcome to Fintech Insider Insights. I am Ross Gallagher, the Head of Consulting here at 11FS. Today we're talking about financial wellness and whether we need to rethink what that actually means. For decades, improving financial wellness has largely meant improving financial literacy. Teach people to budget, teach people to save, teach people to invest, and teach people about pensions and debt. But knowing what you should do with your money doesn't necessarily make those decisions any easier. Now, AI offers a very different proposition. Instead of simply giving us more information, AI can increasingly understand our circumstances, recommend what we should do next and potentially take some of those decisions out of our hands entirely.

0:58Ross Gallagher:So is the future of financial wellness really about making everybody better at managing money? Or could it be about reducing how much managing they have to do in the first place? And if AI starts making decisions for us, does that make us financially healthier or just create a completely new set of problems? To discuss this, I'm joined by Lucy Wayman, co-founder of wellness. Lucy, welcome back to the show. It's lovely to see you again. Maybe you would just reintroduce yourself to our listeners and tell us a little bit more about wellness. Sure. Thanks so much for having me on again. As you mentioned, I'm Lucy, one of the co-founders of wellness.

1:33We are on a mission to make regulated financial advice accessible and affordable for mid-market women. So Elle is our proprietary AI. She helps women understand their gaps with their financial score. She helps them build confidence and connects them with female advisors when the time is right. So this conversation feels very on brand for us because we are living inside the line between AI guidance and regulated advice kind of every day. So I'm excited to dive into talking about it.

2:08Ross Gallagher:Yeah, likewise. I mean, it's such an important topic. So it's great to have you on and sharing your sort of firsthand experience and perspectives with us, Lucy. So thank you so much. Next up, we have another warm welcome back to the pod for Aditi Subaro, Financial Services for Snowflake. Aditi, it's always great to have you on the show. How are things going, both yourself and with Snowflake? All well. Thank you so much, Ross. Always great to be back on the show. Things have been very exciting, as you can imagine, with lots moving in the world of data and AI at Snowflake overall. I've been spending a lot of time with banks and financial services customers in actually helping them make the most of AI from an outcomes perspective.

2:54And the focus has very much been on how do you actually get meaningful outcomes? How do you explain to the AI the context of the underlying data that they're working on? And that can have significant impact on the benefits that that AI can help financial services firms and also their customers achieve. So it's been a really interesting few weeks.

3:18Ross Gallagher:Yeah, I'll bet. And I love you framing it in the context of outcomes, because I think there's just so much potential for improving those outcomes for those end users. as you're so rightly saying. I think we're going to get into a lot of that as we move through the show. But that is our awesome panel. I think we've got a really interesting topic. So, I think we should dive right in. We mentioned it sort of at the top of the show in the intro. So, I suppose starting with financial literacy seems like a reasonable place to start. I think, you know, this is maybe the sort of the little mismatch that we've seen traditionally.

3:58Ross Gallagher:I think we've largely treated financial wellness as maybe an education problem you know if we sort of give people more knowledge and better tools um then they'll make better decisions but i don't know that that's um that's really played out sort of how we expected i don't know if that relationship um has necessarily been that straightforward i think we'll unpack that as we sort of get into the show itself. But Lucy, I think it'd be an interesting place to start, maybe just take a little temperature check. What do you think being financially well actually means? Yeah, it's a good question. I think it often, or certainly historically, would have been reduced to just, you know, have I got enough money for the things that I need or each month.

4:51But that's a pretty narrow slice of kind of bigger picture financial wellness. I mean, for us at wellness, we have this financial score and it works across six pillars. So, you know, budgeting is part of that, but it's also protection, your mortgage, pensions, investing and legacy. And we're really trying to help people see their gaps across this full picture. And we're definitely still seeing lots of gaps. I mean, half the women we speak to have never checked their pension nearly two-thirds have got no will and you know half have got no critical illness but I think most interestingly the average confidence score we see is 5.9 out of 10 so there's still you know a gap there in terms of just general confidence around financial decision making and when we score we're looking at a mix of practical and knowledge base so we're thinking about education and you know actual gaps so we might ask you know have you got enough income protection to cover six months without pay but also do you actually understand the difference between a cash isa and a stocks and shares isa so i think we kind of see literacy um i don't see it as kind of financial literacy then confidence then outcomes i kind of see them all being very linked And I think, you know, knowledge is kind of the unlock.

6:17Rather than it being a separate thing, we still need it, definitely. You know, without it, you don't know what you don't know. And I think if you don't understand your vulnerabilities, then you don't even know what needs fixing. And you're certainly not going to take action on doing anything about it. But equally, knowledge alone doesn't move the needle. I don't think, you know, you need these three things together. You've got to understand what's wrong. You've got to feel confident enough to act. And then you need a system that actually helps you make the right choice rather than just showing you the options, I think.

6:54Ross Gallagher:I think that's spot on. And I think you're exactly right. I mean, you know, the sort of financial wellness and maybe financial literacy or the knowledge that we talked about, they're not necessarily one in the same, but they also don't exist completely in isolation. And I think that's such an important point. And Aditi, I'm really interested in your perspective as well around what does it actually mean to be financially well? So I was thinking about this, especially when I knew what the title of the show was, but also more broadly, obviously. And the way I see it, I would almost bucket it into three pillars.

7:32So financial wellness as a whole to me is effectively a combination of knowledge, access and agency or choice. So the first thing, exactly like Lucy said, you need to know what you need, what is good for you and what you should be doing. And that knowledge or that literacy is effectively the first unlock. The second piece, though, is access. If I know I should have a pension, but I need to jump through multiple different hoops and obstacles to even open a pension account or like do what it takes to transfer money from one account to the other. I might know what I need to do, but not not do it.

8:11still. So I think having that access and whether that is under the bucket of financial inclusion for the underbanked, whether that is just making the elderly and the vulnerable like more prone to use digital banking than they are otherwise, it spans the whole gamut. But access is a big part of financial wellness. And then the third piece around that is the agency, which kind of ties into the confidence. I know what I need to do. I can do it. But am I brave enough to press the button? Do I have the confidence to close one account and open the other? Do I have the ability to say, well, this is a great SEIS scheme, and therefore I want to maybe invest in it?

8:47All of that needs to come together to then give you both a feeling. And I think this is where the interesting thing is, right? That it is one thing on paper, it is a whole other thing emotionally, to feel and believe that financial wellness. There are so many people, especially of the older generation in my family, who are very well on paper financially, but they still feel scared. And I think that link is also something we often tend to miss in the broader definition of financial wellness. There's also something very interesting here. And this kind of reminds me of how my kids were taught to keep washing their hands in COVID.

9:25They were explained why they should do it. They had all of these songs. they had like multiple different drills and practices of washing their hands. However, the moment somebody is not looking over their shoulder, they would stop doing it. And it's very interesting that there are a number of different surveys around financial literacy, more specifically, would say that even if you know what you should be doing, you are very, very unlikely to actually keep doing it unless forced into it. So I think that bridge is also something that we need to be very aware of when thinking of literacy as it connects to wellness.

9:54Ross Gallagher:Lise, that point that Aditi made about confidence is so important, isn't it? Because it sort of goes back, I suppose, to some of the statistics that you mentioned around where there are gaps in people's financial lives. and there were some really staggering statistics in the Mills report, the FCA's recent report, sort of setting out their perspective around the impact that AI is going to have on financial services. The advice gap, so only 9 % of consumers currently use traditional advice. Just about 30 % hold life or income protection. You've got really low numbers around account switching. You've got around 900 ,000 customers that are currently unbanked.

10:42Ross Gallagher:You've currently got about 300 billion pounds worth of savings in the UK sitting in low interest accounts. And I think maybe some of those statistics just go some way to reinforcing Aditi's point about that lack of confidence in people not necessarily feeling comfortable or backing themselves to take some of the financial decisions, even though they might know in their heart that it would benefit them in the long term. Yeah, definitely. I think, you know, you've really hit the nail on the head there. I think consumers do want education. They still need education, but they also want more than just guidance.

11:19You know, that's why I think human advisors do still have a very key place in, you know, financial services at least. You know, AI can unlock a lot. But without that confidence, people don't actually make decisions. they feel sort of stuck in this overwhelm of like, what should I do next? And it's also why we have to be careful because some people are going to just, you know, general LLMs for validation on financial decisions. And, you know, honestly, they shouldn't be. And I think it, you know, even with all these tools available, money still often feels just too difficult or you're going to get to it later.

12:03It's, you know, unless it's really pressing as in I'm running out of money, I think it's hard to keep that urgency and to, especially if it's outside of people's comfort zones, for them to have that confidence, like you say. And, you know, one of the things that we get kind of pushback on a lot is, you know, why would someone use wellness? Couldn't they just talk to Claude or ask ChatGPT? But I always kind of say the same thing, which is, well, they could, but will they? You know, like, are they actually, do they know the right questions to ask? do they have the impetus to ask them even if they ask them and they get an answer do they have the confidence to actually act on them without input from someone that they feel can genuinely give them advice and tell them that it's the right decision to make so I think you know the goal is really to like find that tipping point of what is going to make something you know what's going to make someone want to solve the problem right there and then rather than it being filed away or rather than them losing their confidence again.

13:06And I don't mean, you know, the super financially savvy. I'm kind of talking about the everyday consumer. And I think, you know, I love that example of your children washing their hands because I was thinking about my own examples and just thinking about some of the content that we do, for instance. You know, we run a webinar on the pension gap. People on the call, they're so engaged. They're like, oh my God, I've got to sort this out. Yes, you know, they totally buy into it. But the second they leave the call, life just kind of gets in the way again. And I think, you know, there's a gap between like knowing what you should do and actually doing it.

13:45So I see a real role for AI to play in helping nudge people to make decisions as well. And that's something that we've done with Elle is that she can, you know, notify you if something changes in the market. Or if you have a life event can help, you know, show you what that might mean you need to do. And I think, you know, yes, it should be a source of information and it can help with that education piece. But like, how do we find a way for it to keep showing up at the right moment so that people's good intentions don't just evaporate, you know, the minute that they leave a webinar or the minute someone stops watching them wash their hands?

14:23You know, how do we kind of keep that impetus and actually make it lead to action? I think that's a very interesting kind of phenomenon that we're seeing popping up in the AI world also in general. So I spend a lot of my time helping banks kind of automate business processes or use AI to make better decisions like we spoke about before. What you said, Lucy, is validated completely. And I had once read about this really interesting study. I should have looked it up, actually. But back in 2014 or 2015, they ran a study in the U.S., which was actually kind of a meta survey. So that study itself studied more than 200 different studies that came before it in the world of financial literacy specifically.

15:07And they wanted to determine how much of a change in outcomes or overall financial statistics did literacy and financial knowledge or being on courses, etc., make in participants. Guess how much the impact was? I don't think I should guess because I also looked at this survey. But go on, Ross, you guess.

15:29Ross Gallagher:I'm not going to go on the record. Okay, but it was practically nothing. So I think that's kind of the point here. And the reason I referred back to the whole automation piece with AI is that when it comes back to Lucy's point of having that human advisor, somebody who's going to push them to actually make things happen, somebody who's going to give them that reassurance and saying, I've got your back. Like AI can never tell you that it has your back. So this whole perspective, which, and I've mentioned this before, even on the show, like I love which NatWest has a tagline around it, which goes around moments that matter.

16:06So it is those high impact decisions which actually need that human intervention or a person or somebody whom you can rely on, whether that is buying a new house, whether that is like you're having a baby and you want to figure out how your life insurance is set up for that, etc. Those moments that matter is somewhere where that advisory needs to come in and push you to actually make that decision and do the right thing and make that action happen. The interesting thing, however, is that if you look at the market across available apps and AI tools and even robo advisors, etc., to some extent, a lot of those are very short term, very tactical kind of decisions and interactions.

16:52Should I top up this amount and round it off and you can invest in charity or you can put this into a savings account? Yes, you can. Or do you want to forego this coffee and then like invest in your pension with it? Yeah, maybe. However, there is a big gap between these short term things which we rely on AI to do or help us do versus the really long term, high stakes, high value decisions that are critical to ensure financial wellness. And I think even in the AI world, there is still a big gap there. It is the big ticket items. It is the long term thinking that needs that buffering slash support.

17:31And they're not really seeing enough there in the space of AI versus the tactical small ticket behavioral items where there is a lot of AI available. So I think there is still that gap in terms of making actions happen for wellness.

17:42Ross Gallagher:Do you think, Aditi, we're starting to see, though, sort of movement in that direction? And I suppose there's a couple of things, again, if I refer back to the Mills report that sort of maybe suggests that to me. So I mentioned about the advice gaps. You've only got around about 9 % of consumers in the UK that use traditional advice. But then you've got one in five UK adults. So about, what are we saying, 20 % open to AI making decisions for them. You've got around 26 % trusting general purpose, Lucy, tools such as ChatGPT, Claw, Gemini, etc. for financial advice. So I suppose I was starting to see a genesis and maybe the difference between that 9 % seeking out sort of traditional human advice and the 26 % or so that are comfortable doing it through AI.

18:41Ross Gallagher:Does that suggest that we're sort of moving now much more in that direction? I would still like to kind of double click a bit on the nuance there. So most of these statistics, which we tend to read in surveys, especially of people interacting with or using AI, most people are using it as a glorified Google or perhaps as money supermarket on steroids. So if you actually look through those queries and the prompts that are put in, most of them tend to be explain this to me, i.e. what is this product? What is this offering? What does that mean? Or do a comparison. should I set up a current account with this bank versus that bank and what are their interest rates and what will that mean for x amount of money or should I draw out an insurance policy from this place versus that place and what does that mean very few people are actually going to chat GPT and saying this is my situation this is what I do this is how much money I earn I want to plan for retirement which is 30 years from now give me a financial plan and again even those people who do do it are highly unlikely to actually give the AI all the information that it needs to be able to give that advice in a holistic manner.

19:57And it is often very frustrating because these surveys tend to almost mislead people who are building products or who are building AI tools because they tend to think that the reception and acceptance is much higher than what it actually should be. And And therefore, the problems that they are trying to solve tend to be the wrong problems. But we almost need to figure out, yes, there is that receptivity. Yes, there is that interaction, which in itself is very encouraging. Because to Lucy's point, if that first unlock of literacy and understanding and knowledge about financial services, offerings and products and risks is taken care of by the AI, then the institutions, the regulators and the advisors are already starting off from a level which is much higher than what it would have been otherwise.

20:41And then they can spend their time and effort in genuinely advising people for sustainable, more impactful outcomes. So I think that is kind of my bugbear on AI-related statistics of financial usage and interaction.

20:57Ross Gallagher:I think that's brilliant, though, because it's, you know, we all get swept up in the hype cycles, right? And we all get a little bit carried away when we read some of those things. but actually sort of maybe just grounding ourselves in that little bit of nuance and taking a more, maybe a more realist view on where we're at right now is no bad thing. Lucy, do you sort of agree with that in terms of where we're at? I do agree and I feel very happy hearing that because, you know, that was kind of the hypothesis that we're, you know, building our business around is that actually, particularly for women.

21:32AI adoption is still a lot slower than it is for men. And I think there is still a trust piece, like exactly like you say, we're very happy using it for research, but I still think there's a big trust gap around like, you know, taking a decision, making a really big high states decision from an answer. I think like if we think about what is happening which you kind of alluded to already it's really great for habit building I think you know we see it like you say in these in these small things that we're doing already so like for instance for me I use plums you know rainy day pot or whatever that automates something that I'm already quite comfortable with as a concept but I think if you're you know if you're happy putting money manually into a cash isa you're probably happy with AI taking on the automation of that but would you be as comfortable with automation moving your money into something less familiar you know an area that you don't understand as much or that you've not touched before and so that kind of goes back to this whole knowledge plus confidence plus trust piece which is you know if you're happy to do something manually and you understand the concept behind it you're probably happy to automate it and hand it over but you know if you're not at that point I think it's a different conversation and I also worry a little bit about the kind of convenience of these tools at our fingertips like stripping away understanding and I kind of even see that in myself you know using Claude for tasks that maybe I don't fully fully understand and then if it gets things wrong I don't know enough about the topic to spot it and I think that's a real kind of worry with people using it you know one is great that it can educate and inform but you've got to have that grounding because I think if you're coming at it without that sort of base layer and trying to get it to you know make comparisons for you or make decisions for you where you don't fully have you know the comprehension on what it's doing that is a big risk so it's you know it's fine right up to the edge of your own understanding I would say but past that point, it's not really saving you time.

23:44I think it's kind of, you're just outsourcing the risk or, you know, you're not really, you don't have that same ownership. So I think, yeah, there's definitely lots of nuance around how we're actually using it and what that means practically. So the way I often think about this is, and Lucy, you might resonate with this, right? Like in the GTM world or in the business building world, we have strategy and we have execution. And I think where we are at is kind of counterintuitive because though we use AI a lot for the research, for the analysis, for the comparisons, for the explanations and so on, what we are letting it do, and this is true across most of the consumer space, it's also interestingly true across the enterprise space to a large extent, what we are allowing AI to do, and in my opinion, thankfully so, is that small time execution.

24:42Like, for example, top up the saving for me, or build your own agent who will run a search and optimize your current account across where the best offers are, or the best rates are, or the best cashbacks are, and so on. All of that is fine. But where it comes to that long term strategy, there are very, very few tools or banks who are letting that be automated by AI. So it's almost like, yes, help me take the decision. But I still want to be the person pressing the button to make that happen. And even at a larger institutional stashed enterprise scale, this is being very much incorporated in as part of the workflow as part of the standard interaction, you might have an AI telling a relationship manager that here is the recommendation you should give this customer.

25:27But whether or not you actually go and redirect their money based on that recommendation is still something that the customer and the relationship manager will need to actively initiate. So I think that's something which is still happening in the AI world. And the other thing which this sort of boils down to, especially when you start thinking of that decisioning, is a lot of the decisions we take especially with respect to finances and kind of high stakes finances are very multi-pronged. I might have all of my bank statements in front of me. I might have all of my like investments and returns and fund prospectuses and all of that in front of me.

26:10But the decision that I take will not only be influenced by that data but it will be influenced by that context layer of saying well actually I do want to set up my own company in two years time and I know I will go on maternity leave six months hence. And I am really worried that maybe, I don't know, maybe my house is going to have a leak, which I'm not going to be able to fix. None of that data at the moment is consolidated in one place for any kind of technology or any system to be able to act and recommend in a manner that those decisions will be a whole decision. It's almost like the whole person.

26:51They're not going to be able to do that because infrastructurally and architecturally, that single view of customer does not exist. And I think that's the other huge obstacle in AI actually automating any of this because it just doesn't have that information to automate it. So I think that's the other blocker for AI to be able to do more and more in terms of not just taking those decisions, but more importantly, taking those actions.

27:19Ross Gallagher:Yeah, because as you say, I think, is such a large proportion of that full picture is quite personal, isn't it? And even individual appetites to risk and all of that sort of stuff can be difficult, difficult to gauge. And people can say one thing about, oh, I've this roughly this comfort level with risk, but then actually in practice, it's quite different and all of that sort of stuff. And I think this has given us a really useful sort of grounding in terms of where we're at today in terms of how people are using AI around managing their personal finances. And actually, that probably a lot of what people are using it for at the moment is relatively low stakes, you know, automating some roundups or moving money over into a pot.

28:05And I think that's super, super useful.

28:08Ross Gallagher:I think we're going to take a very, very quick break now. And then when we come back, we'll jump into, you know, I suppose, what we think the direction of travel is and the future of sort of where this builds from here. so please don't go anywhere and we'll be back with you very shortly.