When we discuss whether artificial intelligence (AI) is friend or foe, it often surprises people to discover that they’ve been using it for years.
For example, financial advisers and lenders who use mortgage sourcing platforms are already using AI.
To refresh, AI is technology that enables computers and machines to simulate human intelligence and problem-solving capabilities.
But how good is it really? Is it a helpful tool for our industry or is it a threat?
The complexity of later life lending
The mid to later-life lending market is more complex than 10 years ago for several reasons.
Financial advisers should no longer be siloed as either mainstream or equity release specialists. Advisers have to be more strategic in their approach, be able to tap into a much wider, deeper pool of financial knowledge than previously – either directly or through triaged partnerships.
On that point, advisers should consider all available options for consumers. Specialist advisers, for example, should record all customers that they refer to other professionals, as well as the eventual outcome.
This is to support the Consumer Duty obligations to evidence good customer outcomes. It has to be clear to the Financial Conduct Authority (FCA) that advisers have explored all options available and provided customers with all the information relevant so they can make the best decision relating to their circumstances.
This could mean considering retirement interest-only (RIO) products, standard term interest-only (TIO) and even capital and interest products, as well as lifetime (equity release). The 50- plus age bracket is no longer the sole home of equity release products. That said, a lifetime mortgage – a form of equity release – could be the best outcome for some borrowers.
And the world itself is more complex. There is so much more information out there and customers are better informed and able to access mortgage product rates via a couple of touches on their phone.
The human side of emotional intelligence
LiveMore was founded from an emotional place. Our CEO Leon Diamond couldn’t understand why firms weren’t lending to the people with the strongest credit history and equity. So he founded LiveMore to rectify that.
As a 52-year-old, when I talk to a financial adviser, I don’t want them simply to advise me on a two- or five-year mortgage. I want them to ringfence me for the rest of my life and handle all those remortgages that I’m going to need to do. I want them to challenge my preconceptions and identify my feelings and emotions as a human being.
A piece of software can’t understand that I might not want to downsize at a certain age when I hope to have space for grandchildren at Christmas. AI software will likely advise me to downsize to a two-bedroom bungalow at the end of my mortgage term, not understanding these emotional factors and realising that downsizing is the last thing I want to do.
At the end of the day, AI on your laptop or smart phone can’t create a strategy for your client. Emotion is involved. AI can be an incredible tool, but it will be some time before it will understand the intricacies of emotional intelligence like humans do today.
Where AI works
Although void of emotional intelligence, AI does have its incredible uses.
While humans can be overwhelmed with complexity and can’t see the wood for the trees sometimes, in seconds AI can cut through the technical complexities of the later life lending market.
LiveMore’s AI technology platform, the LiveMore Mortgage Matcher, uses AI so its affordability calculator can match your client to the right product or products.
This technology generates an average increase of 41% on the loan amount that intermediaries can offer clients. Some 33% of clients see their maximum borrowing value increase, and there are 41% more instances of intermediaries changing the product at the maximum borrowing calculator stage.
In five minutes, an intermediary can explore all four products and have a documentable PDF to give to their client, save to their file and demonstrate that they’ve had the conversation about all four types of mortgage that are potentially available to the customer. A Consumer Duty AI dream.
Les Pick is director of intermediary sales at LiveMore
