Broker shares concerns about AI in mortgage industry

Artificial intelligence versus human touch: Who wins?

Broker shares concerns about AI in mortgage industry


By Ryan Johnson

A Brisbane-based mortgage and finance broker has thrown fuel on the fire of a burgeoning debate: the role of artificial intelligence (AI) in loan decisions and its potential impact on the human touch of traditional brokers.

While some see AI as a revolutionary tool, Carl Verdouw (pictured above), director of Financien expressed genuine concerns about its limitations and ethical implications.

The comments came after a recent study showed a small but concerning number of Australians (15%) would be comfortable with having generative AI assist with choosing their mortgage.

Far from a being a luddite, Verdeow said he was “definitely not against” AI in its power to support and streamline.

“However, when it comes to the actual decision, I believe that’s best left to a qualified broker who has gotten to know and meet their clients.”

Verdeow’s primary concern stems from AI's reliance on the client's input for its recommendations. He argued that many clients, especially those lacking financial literacy, struggled to articulate their needs effectively.

“I would confidently guess that any broker who has been around for a while could share that they too would have helped a client who couldn't articulate their needs well,” Verdeow said.

“Such clients might not understand the AI's prompts well, making them at higher risk of receiving less suitable recommendations and products compared to an experienced broker's recommendation.

“On the other hand, brokers can read and pick up on subtleties from interactions with our clients that curate our decision to present more suitable products.”

How does AI fit in with Best Interests Duty (BID)?

Another concern is around best interests duty (BID).

 If an AI recommends a product not in the client's best interest, who's held accountable? Since AI isn't human, it raises questions about who's responsible for this potentially damaging advice.

“You could argue AI did its job by recommending the right product matching the client’s prompts, though again you can argue the client who lacks the financial literacy is at risk of accepting the AI’s guidance and ‘clicked’ on the recommendation anyway because they couldn’t articulate the right questions,” Verdeow said.

“Whereas with a broker, we can ask if they understand everything before proceeding and trust our gut if we feel they don’t quite understand or lack confidence in their decision.”

Furthermore, Verdeow is also apprehensive about the implications of AI and the financial regulations of financial institutions – such as anti-money laundering (AML) and know your customer (KYC) protocols.

These measures combat illegal activities like money laundering and terrorism financing by verifying the identity and legitimacy of customers.

“Without going too speculative and delving into the capability AI holds with generating fake images or documents which many of us have seen now, it does beg the question whether one could use AI to trick AI into getting it finances for illicit purposes,” Verdeow said.

The benefits of AI for mortgage brokers and clients

While concerns about AI taking over loan decisions dominate the headlines, it's important to remember the significant benefits it already offers both mortgage brokers and their clients.

Verdeow is quick to point out that AI “can be excellent with streamlining data processing and assisting brokers”.

“Imagine a client discovery meeting where AI seamlessly gathers information from different sources with consent, saving both the client and broker time,” he said.

“This data could then be automatically populated into your CRM and Quickli, eliminating redundant data entry and providing instant insights into the client's borrowing capacity.”

What’s preventing AI from taking over mortgage brokers?

While some in the mortgage industry may not be worried about AI taking over, other industries have already had a small taste of that potential dystopia.

Financial advisers are already under threat, with Betterment’s robo-advisers using AI technology to learn about an investor and build a personalised profile based on their financial plans.

Meanwhile, “the world’s first artificially intelligent attorney” is already handling bankruptcy cases.

So, what’s to stop the same thing happening to the mortgage broking industry?

It all comes back to the human touch, according to Verdeow.

“I think the misconception some brokers worry about is of AI replacing us,” he said. “There are probably a select few clients who possess the necessary financial literacy and don’t care much for the personal touch, and AI may very well suit them – to which I’m glad they have a solution.”

“However, I know all my clients have appreciated the time I take to get to know them and spend finding them the most suitable solution to their needs and developing the trust they carefully place in me.”

While AI is here to stay, according to Verdeow, he cannot see it replacing mortgage brokers as the largest source of loan writers.

“So, to that, I encourage brokers to keep developing strong relationships with your clients (new and old) and embrace AI for its timesaving and streamlining benefits. If you’re good at what you do, I don’t believe it will replace your role.”

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