As the financial industry increasingly embraces artificial intelligence (AI), it has ushered in remarkable efficiencies and advancements, yet investor concerns are rising—particularly around AI-fueled financial fraud. In fact, according to our latest Janus Henderson Investor Survey, 73% of investors believe AI heightens the risk of financial scams, and over half (56%) are worried that they or a loved one could become victims.

While these fears are understandable, investors still see value in AI, especially when it comes to streamlining administrative tasks and delivering educational content. However, it’s clear that for investment decisions and personalized communications, clients still strongly prefer the human touch that only a trusted advisor can provide.

For financial advisors, this signals a unique challenge—and opportunity. Here’s how advisors can address their clients' fears about financial fraud and leverage AI effectively while maintaining personal relationships that build trust.

The Rising Concern of AI-Driven Financial Exploitation
Financial fraud has long been a concern for investors, but with AI enabling increasingly sophisticated scams, those fears have escalated. In 2023 alone, AI-powered scams led to over $3 billion in losses. Our survey also found that younger generations are particularly wary, with 66% of Millennials and 63% of Gen X investors expressing concern about financial fraud, compared to lower levels of worry among Baby Boomers and the Silent Generation.
The higher levels of concern among younger generations may stem from their greater familiarity with AI and its potential for misuse. Many Millennials and Gen X investors also worry about the vulnerability of older family members, such as parents or grandparents, who may be more susceptible to these scams.

Advisors are uniquely positioned to help clients navigate this evolving landscape. While 45% of advised investor survey respondents have already received resources from their advisor on how to avoid financial exploitation, another 29% expressed interest in learning more. This presents a clear opportunity for advisors to engage with their clients on a critical issue and, in doing so, strengthen their relationships.

AI in Practice: Balancing Efficiency With Client Trust
Despite some concerns about AI, most investors remain open to its use—within certain boundaries. For instance, 83% of investor survey respondents are comfortable with their advisor using AI to handle administrative tasks, and 85% are okay with AI-generated educational content. These areas allow advisors to boost their efficiency and focus more on meaningful client interactions.

However, there is a fine line when it comes to personal connections. More than one-third of investor survey respondents would be uncomfortable with AI being used to make investment recommendations, and 44% would object to AI-driven responses to their texts or emails. These preferences highlight an important truth: while AI can be a valuable tool in a financial advisor’s toolkit, clients still crave the human touch for critical decisions and personalized communication.

Practical Tips for Advisors: Merging AI With Human Insight & Touch
As AI continues to reshape the financial landscape, advisors need to strike the right balance between harnessing its benefits and maintaining the personalized service clients value. Here are a few practical tips for blending innovation with human interaction:

1. Educate Clients About AI-Driven Risks: As AI-fueled financial fraud becomes more sophisticated, proactive education is key. Advisors should regularly communicate with clients about how to identify and avoid scams, offering resources, such as those provided by Wayne State University’s Institute of Gerontology, that help clients protect themselves and their families.
2. Leverage AI for Administrative Efficiency: By automating administrative tasks such as data entry, document processing, and account maintenance, advisors can save time while reducing the risk of human error. This allows advisors to focus on higher-value activities, like deepening client relationships and developing personalized investment strategies.
3. Maintain Human Control Over Investment Decisions: While AI can analyze data and offer insights, the ultimate investment decisions should remain firmly in the hands of the advisor. This ensures that clients receive a customized approach that reflects their unique needs, risk tolerance, and long-term goals.
4. Keep Communication Direct & Personal: Clients highly value human interaction, especially when it comes to discussing their financial future. This is why it’s crucial that advisors personally handle direct communications to build trust and reassurance. Direct communication via in-person meetings and phone conversations are most impactful.
5. Stay Ahead of the AI Curve: As AI technology evolves, so too will its applications—and its risks. Advisors should stay informed about the latest AI trends, both to enhance their practice and to better educate their clients about the potential pitfalls.

In today’s AI era, there is no question that advisors face the dual challenge of embracing AI’s benefits while safeguarding their clients against new risks. By leveraging AI to streamline operations, providing ongoing education on its benefits and pitfalls, and maintaining direct/personal connections, advisors can strike a balance that not only enhances efficiency but also preserves the trust and personalized service that clients seek.
   
Matt Sommer is head of the Specialist Consulting Group at Janus Henderson Investors.