Viral sensation ChatGPT and other generative artificial intelligence tools are making their presence felt in every arena of human endeavour.
As generative AI and machine learning kick into higher gear, industries across the board are scrambling to adopt and integrate ChatGPT and other large language models (LLMs) into their workflow to enhance speed and efficiency.
One such domain is the financial services industry. Perhaps one of the most conservative of all sectors, it has now started to warm up to the potential of generative AI. This could have meaningful implications for investors and the broader financial planning industry.
Behemoths on the bandwagon
There is no better testament to generative AI’s growing impact than global investment banks such as JP Morgan, Morgan Stanley and Goldman Sachs recognising the potential of AI and embracing the technology wholeheartedly.
These institutions are leveraging new AI models to develop sophisticated tools that help financial advisers respond to client queries and create personalised investment decisions.
While the fast-shrinking pool of sceptics often points to inaccuracies, experts argue these powerful AI tools would continue to become more sophisticated and are poised to revolutionise the financial planning landscape.
ChatGPT comes out on top
Although the role of generative AI in the financial industry is in its infancy, there are experiments and studies that provide evidence of the technology's true potential.
For instance, JP Morgan is developing a ChatGPT-like AI service, called IndexGPT, a trademark filing shows, that can select securities and investment advice.
According to the filing, IndexGPT plans to utilise cloud computing software powered by AI that can carry out a “selection of financial securities and financial assets” and select investments “tailored to customer needs”.
Not to be outdone, Morgan Stanley is currently conducting trials of a chatbot powered by OpenAI technology for its 16,000 financial advisers.
Like ChatGPT, this tool will provide instant answers to advisers' questions. However, it will generate responses exclusively from the approximately 100,000 vetted research pieces from Morgan Stanley, reducing the likelihood of errors.
AI may be some way away from handling money independently, but a study conducted by two South Korean academics shows that the technology beat out random selection in creating a diversified portfolio.
As an LLM, ChatGPT has the potential to capture special aspects of the market that human investors cannot, rendering it a valuable tool for managing portfolios, the study says.
It notes that ChatGPT can identify abstract relationships between assets, particularly in terms of their dissimilarity regarding asset classes, which helps to achieve better diversification than an average portfolio.
In another test, a simulated portfolio of stocks chosen by ChatGPT outperformed several top-performing investment funds in the UK.
As of August 25, the ChatGPT fund had grown 9.63 per cent, comprehensively outpacing leading UK funds that collectively managed a meagre 0.43 per cent gain for the same period.
While the fund continues to outperform, it doesn’t yet have access to real-time information.
“The next step would be to make a portfolio that constantly monitors the market and tweaks the portfolio on an ongoing basis,” says Jon Ostler, chief executive of Finder.com, the company behind the study.
New AI tools are much more efficient at processing and analysing large amounts of data to detect patterns.
“Generative AI has the potential to support and enhance many aspects of financial planning if it has access” to the most recent and relevant financial data, says Mr Ostler.
Notably, AI is better than Monte Carlo simulations; while the latter uses models constructed by experts to predict probabilities, the former builds its own models to predict future outcomes, Mr Ostler adds.
When it comes to stock markets, “the lack of bias in AI could give it the edge, [and thus] could be a real game changer in the future”, he says.
Michael Zagari, a Montreal, Canada-based associate portfolio manager with Mandeville Private Client and Zagari + Simpson, is one of the early adopters of ChatGPT.
“The tool helps me point to where I should invest more time researching on a particular data point of moment in time,” says Mr Zagari who uses ChatGPT to understand investment trends.
“The trade off is the data I am receiving has a time lag,” he adds, referring to a key drawback of ChatGPT whose data set is limited up to 2021 and has no awareness of events that have occurred since then.
Watch: The AI revolution: What does our future look like?
AI and financial planning
More recently, AI models have become highly sophisticated at making predictions and working with different scenarios to test financial outcomes.
While they can’t foretell the future – yet – predictive AI tools can play out many different scenarios for investors, providing the best possible outcomes for them.
“There could be huge cost and efficiency benefits from using AI as it can sift through vast amounts of data both quickly and accurately,” says Mr Ostler. “After the hype around ChatGPT calms down a bit, simple automation tasks like this may end up being the biggest impact of AI.”
ChatGTP is a valuable asset that supports advisers, not supplant them, says Mr Zagari.
“I’m not convinced that people will fully trust the advice they receive from AI, which is no different than people trusting their self-driving cars with an autopilot drive,” he says.
That could change in the coming years. The constantly improving quality of AI’s predictions have prompted some to believe that, in the not so distant future, the technology could make better decisions than humans.
“Even the best finance professionals have inherent biases that will impact their judgment and AI may have an opportunity to remove this from their processes,” says Mr Ostler.
Still, AI will not make anyone rich and likely will mirror market/index returns, which is great from a cost perspective, Mr Zagari says.
“If your retirement plan requires you to take on more risk because the investor is not prepared to save more after tax, a shortfall in financial goals will remain in play.”
Some financial industry experts prefer to see generative AI more as a co-pilot that can assist in some areas of a financial adviser's job.
There could be huge cost and efficiency benefits from using AI as it can sift through vast amounts of data both quickly and accurately
Jon Ostler,
chief executive of Finder.com
GPT-4, a more advanced version of ChatGPT, can parse vast amounts of data, analyse multiple variables and offer possible scenarios.
Although its prowess doesn’t extend to crystal-ball predictions, “it can aid in creating hyper-personalised strategies” drawn from specific input, says, Dave Mazza, chief strategy officer at Roundhill Investments, a company that has begun to integrate generative AI into many of its workflows to take advantage of its key benefits, such as accuracy, speed, and cost-effectiveness.
In time, generative AI could become increasingly advanced and adapt at breaking down more complex areas of financial planning and “offer more personalised advice”, Mr Mazza says.
Potential pitfalls
As with all emerging technologies, generative AI has its limitations and requires additional refinement. Potential risks include data privacy and security, the ethical application of AI and algorithmic biases, among others.
“If AI is managing hundreds of thousands of dollars' worth of investments, a small mistake or misunderstanding could wreak havoc on portfolios,” cautions Mr Ostler.
Some of these risks could be mitigated with proper design and supervision, says Mr Mazza, who admits that “the role of advisers may shift to interpreting generative AI outputs and providing more personalised advice”.
Another issue is accountability. Who is ultimately responsible for the advice given?
“I assume that will remain the financial adviser’s responsibility, just as it’s the adviser’s responsibility today for overseeing the computer-generated information that he or she provides,” says John Rekenthaler, director of research for Morningstar Research Services.
AI can give financial advisers an edge
As things stand, ChatGPT and other LLMs in their current iteration remain an auxiliary tool. “ChatGTP acts as a complement to my research and not as a replacement, which is similar to how investors should view the technology,” says Mr Zagari.
In its role as a personal assistant, AI could perform many mundane tasks for advisers, allowing them to focus on other areas of financial planning and client engagement.
As the technology becomes advanced enough to grasp more intricate aspects of financial planning, Mr Rekenthaler is convinced that it will provide an edge to financial advisers who are able to effectively integrate AI technology into their workflow.
“Across many industries, generative AI has the potential to make even novices behave like power-users,” Mr Mazza notes, stressing that “in the near future, advisers who embrace AI may have a leg-up on those who don’t”.
MATCH INFO
Uefa Champions League semi-finals, first leg
Liverpool v Roma
When: April 24, 10.45pm kick-off (UAE)
Where: Anfield, Liverpool
Live: BeIN Sports HD
Second leg: May 2, Stadio Olimpico, Rome
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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Attacks on Egypt’s long rooted Copts
Egypt’s Copts belong to one of the world’s oldest Christian communities, with Mark the Evangelist credited with founding their church around 300 AD. Orthodox Christians account for the overwhelming majority of Christians in Egypt, with the rest mainly made up of Greek Orthodox, Catholics and Anglicans.
The community accounts for some 10 per cent of Egypt’s 100 million people, with the largest concentrations of Christians found in Cairo, Alexandria and the provinces of Minya and Assiut south of Cairo.
Egypt’s Christians have had a somewhat turbulent history in the Muslim majority Arab nation, with the community occasionally suffering outright persecution but generally living in peace with their Muslim compatriots. But radical Muslims who have first emerged in the 1970s have whipped up anti-Christian sentiments, something that has, in turn, led to an upsurge in attacks against their places of worship, church-linked facilities as well as their businesses and homes.
More recently, ISIS has vowed to go after the Christians, claiming responsibility for a series of attacks against churches packed with worshippers starting December 2016.
The discrimination many Christians complain about and the shift towards religious conservatism by many Egyptian Muslims over the last 50 years have forced hundreds of thousands of Christians to migrate, starting new lives in growing communities in places as far afield as Australia, Canada and the United States.
Here is a look at major attacks against Egypt's Coptic Christians in recent years:
November 2: Masked gunmen riding pickup trucks opened fire on three buses carrying pilgrims to the remote desert monastery of St. Samuel the Confessor south of Cairo, killing 7 and wounding about 20. IS claimed responsibility for the attack.
May 26, 2017: Masked militants riding in three all-terrain cars open fire on a bus carrying pilgrims on their way to the Monastery of St. Samuel the Confessor, killing 29 and wounding 22. ISIS claimed responsibility for the attack.
April 2017: Twin attacks by suicide bombers hit churches in the coastal city of Alexandria and the Nile Delta city of Tanta. At least 43 people are killed and scores of worshippers injured in the Palm Sunday attack, which narrowly missed a ceremony presided over by Pope Tawadros II, spiritual leader of Egypt Orthodox Copts, in Alexandria's St. Mark's Cathedral. ISIS claimed responsibility for the attacks.
February 2017: Hundreds of Egyptian Christians flee their homes in the northern part of the Sinai Peninsula, fearing attacks by ISIS. The group's North Sinai affiliate had killed at least seven Coptic Christians in the restive peninsula in less than a month.
December 2016: A bombing at a chapel adjacent to Egypt's main Coptic Christian cathedral in Cairo kills 30 people and wounds dozens during Sunday Mass in one of the deadliest attacks carried out against the religious minority in recent memory. ISIS claimed responsibility.
July 2016: Pope Tawadros II says that since 2013 there were 37 sectarian attacks on Christians in Egypt, nearly one incident a month. A Muslim mob stabs to death a 27-year-old Coptic Christian man, Fam Khalaf, in the central city of Minya over a personal feud.
May 2016: A Muslim mob ransacks and torches seven Christian homes in Minya after rumours spread that a Christian man had an affair with a Muslim woman. The elderly mother of the Christian man was stripped naked and dragged through a street by the mob.
New Year's Eve 2011: A bomb explodes in a Coptic Christian church in Alexandria as worshippers leave after a midnight mass, killing more than 20 people.
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Dos
- Wear the right fabric for the right season and occasion
- Always ask for the dress code if you don’t know
- Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work
- Wear 100 per cent cotton under the kandura as most fabrics are polyester
Don’ts
- Wear hamdania for work, always wear a ghutra and agal
- Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Tamkeen's offering
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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