Transforming the Financial Landscape: AI in Finance, Accounting, and Consulting
Transforming the Financial Landscape: AI in Finance, Accounting, and Consulting
For many centuries, workers have feared for technological revolution. As early as the 19th century, textile workers in the United Kingdom rebelled against the introduction of new machines. Their workplace would become filled with power looms, stocking frames and shearing frames, all machines that would increase productivity in the industry. In a desperate attempt to save their jobs, salaries and working conditions, so called ‘Luddites’ attacked these workplaces and destroyed the machines. Nowadays, the word Luddites is still used to describe people who resist technological advancements and innovations. These people maybe naive and will resist technology at all cost, nostalgically longing for pre-modern times. On the other hand, some people reclaim the word Luddites and see themselves as critics of the political economy behind our surrounding technology. While we all know that the protest in the 19th century did not stop the technological revolution, also known as the second industrial revolution. In this age, many people still resist technological advancements. This year, the most rapidly emerging trend is the advancement of AI. Generative AI develops at such a pace, that people wonder whether human work will become obsolete. AI can write up any text, create images, code, and seems to know the answer to almost every question we ask. As upcoming professionals in the financial field, should we be worried?
In many instances, the fear of new technology has proven to be irrational. The introduction of calculators has not led to a disappearance of mathematicians. Instead, the small machine would do the most tedious jobs for them, leaving the mathematicians with more time to solve complex issues. The introduction of ATM’s (Automatic Teller Machines) has also not erased the need for bank tellers, but instead made them more able to provide customer service and use their interpersonal skills. If robots can clean nuclear waste and surgeons operate robots for minimally invasive surgeries, reducing strain and the risk of errors, technology may greatly complement our jobs and leave us with the more meaningful part of it.
Instead, some automation has not worked out the way it was supposed to be. Data entry jobs, where workers typed information from paper documents into computers, may seem boring and very suitable for automation. However, data workers today are tasked with labeling data that serves as the input for our deep-learning models. Some underpaid workers are exploited to perform the monotonous task of labelling pictures with dogs and trees, so that our machine-learning models can recognize them. A less threatening, but still unsuccessful, implementation of technology is within the customer service industry. Chatbots are not always able to help customers with delivery problems and other complaints. Customers will still end up speaking to the human version of customer service, but now unnecessarily frustrated, causing more strain and a job made harder for these workers.
All in all, one cannot predict the consequences of technological innovations. Many advancements seem disruptive at first, but actually don’t replace jobs or erase whole careers. On the other hand, if technology in the workplace requires more skills, what does that do to income disparity and less skilled workers? And what if the new technology we face today is actually a lot more disruptive than the advancements we faced in the past?
We are interested in how this new technology affects our work. Specifically, in the financial field, where large sums of data and text are part of the daily job. What can AI do for us in the field of Accounting, Consulting and Finance? What jobs require most human interaction, and is AI as developed as we think?
Finance
In finance jobs, AI can replace certain tasks like financial planning, data analysis and providing financial advice. These are mainly routine tasks, which type of tasks is especially suitable for AI-takeover. Researchers have found that ChatGPT is better at performing financial analysis than humans. Large Language Models (LLMs) like ChatGPT seem to be better at fundamental analysis, which is the analysis that dives deep into a company to derive the intrinsic value of a security. Trading on the suggestions made by these models, even turned out to be more profitable than other strategies. However, one major downside of these LLMs is their opaqueness. If we don’t understand why these models perform so well, or how they come to their conclusions, it might be hard to solely rely on them for our financial analysis. Even more so, there is still room for emotional intelligence, where humans can provide a necessary context that AI cannot. Finance jobs that might originate through the technological developments are jobs that focus on AI development, enabling the optimal use of AI.
Accounting
In the accounting industry, AI has a different influence. Researchers have shown that AI is actually good at accounting. Academics from many institutions have fed accounting assessment questions to ChatGPT. While version 3.5 scored an average of 53%, new version 4.0 was able to get a sufficient score on accounting exams, and with some additional tools, like the use of additional sources and a calculator, it could score up to 85%. The authors of the study highlight that AI can only influence the accounting industry to the extent it can be a proper accountant. With the ability to pass the majority of accounting assessment questions, its disruptive powers may be substantial. AI can be used to analyse data, potentially discovering uncommon patterns. Because of this, accountants might deliver a higher accuracy in their work to clients. Indeed, AI is able to improve the accuracy of management forecasts, the timeliness of earnings announcements, and the precision in forecasting earnings. We do observe that the industry has adapted new technologies. In this trend, the Big 4 accounting firms - Deloitte, EY, PwC and KPMG are leading, with major investments into AI technology. At EY, an AI model is developed for employee questions on their payroll. Their model is trained with payroll questions and legislation from all countries they operate in, and could easily solve all complex questions and issues. PwC has invested in AI to improve their legal and tax work, where AI can help employees solve complex questions at improved speed. Overall, AI in this industry is seen as a useful tool to complement human work. The question remains whether these tools will eventually replace humans or mainly assists employees in their day-to-day jobs.
Consulting
Lastly, AI technologies are affecting the (management) consulting industry. Just like in the other two industries, AI mainly serves as a support for humans in performing their tasks and, for example, analysing data. AI can write the core deliverables, create presentations and may provide 24/7 feedback to its clients. Moreover, on the one side new consulting jobs are created because of the rise of a new type of consulting, which is AI consulting. However, on the other side, clients might be able to find solutions to their consulting issues themselves through using AI, which might be a potential threat to the existence of jobs. All in all, there is a good use for AI in the consulting industry, where it can help process data and automate tasks. However, human oversight is still needed to mitigate the most important risks. Without humans, solutions may become less customized, problematic biases may occur, there may be a lack of transparency and a lack of client trust.
Conclusion
The impact of AI on finance, accounting, and consulting is undeniable. Maybe not to replace our jobs, but as a powerful tool that automates tedious tasks and analyzes massive amounts of data. Financial advisors can get a boost from AI for planning, or accountants catching hidden patterns with AI's help. However, AI isn't perfect. It lacks human intuition and needs clear guidance. The future looks more like a collaboration of AIs computational power and human intelligence, that can provide important context and is able to build relationships with customers. The accounting world can expect more accurate work thanks to AI's data crunching abilities. AI will likely become their super-assistant, freeing them for more strategic thinking. Consulting gets a similar upgrade. AI can handle data, reports, and even basic client support, but consultants bring irreplaceable experience and relationship building skills to the table. As AI continues to grow in finance, responsible development is key. We need to make sure it's fair, clear, and something we can control. Although no one is sure what the future will hold, these technological innovations may not be half as bad as the Luddites predicted in the early 19th century.
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