Using Generative AI in Advice Without Losing Trust: Morningstar South Africa’s Practical Principles for Advisers

Generative AI is quickly becoming part of the modern advice toolkit, promising to reduce administrative burden and improve practice efficiency.

Morningstar’s Behavioural Insights research in 2024 into how investors feel about their advisers using AI has highlighted a lasting insight for advisers: how you use AI matters as much as whether you use it - because clients judge AI through the lens of trust, privacy, and authenticity.

Based on the research, Morningstar has outlined three implementation principles for advisers.

1) Use AI to remove friction - don’t use it to replace the relationship.
Investors are more comfortable with AI when it supports productivity tasks but react negatively when it appears to substitute for personal connection or human judgement. As the report quotes: “Gen AI cannot build relationships for you, so don’t try to fake sincerity.”

2) Make transparency a trust-builder, not a compliance afterthought.
Investors consistently want clarity about when and how AI is being used, and disclosure can reduce suspicion by explaining what’s happening and what it means for them. Practical implication: keep disclosures plain-English, easy to find, and specific about which activities are AI-supported and where a human remains accountable.

3) Put safeguards in place before you scale usage
The most common investor concerns cluster around privacy, transparency, oversight, agency, and bias - meaning advisers should be ready to explain how they protect data, how outputs are reviewed, and how clients retain control.

A practical checklist advisers can use now
To help advisers implement AI in a way that strengthens client relationships, Morningstar Behavioural Insights has developed a Gen AI Implementation Checklist for clients, built around five focus areas:

• Protection of Data
• Transparency in AI Usage
• Human Oversight
• Preserving Client Agency
• Ensuring AI Objectivity

Practical actions from the checklist include:

• Avoid automating human interaction: clients react negatively when gen AI is used to replace human interaction. Where possible, use gen AI to facilitate better conversations rather than substitute for them.
• Address privacy concerns clearly: be upfront about privacy policies, how client data is protected, and what safeguards are in place.
• Use transparency and choice: develop disclosure statements explaining how you use gen AI and consider giving clients an option to opt out of gen AI use for their account.
• Treat gen AI output as a “first draft”: given gen AI’s tendency toward hallucination, build a documented review process to quality-check outputs for accuracy.
• Communicate client benefit: explain that AI helps you do certain tasks more efficiently so you can spend more time on the parts of advice clients actually value - context, judgement, behavioural coaching, and reassurance.

What advisers should communicate to clients
When you do disclose AI use, the most effective framing is client benefit: explain that AI helps you handle certain tasks more efficiently so you can spend more time on the parts of advice clients actually value - context, judgement, behavioural coaching, and reassurance.

Bottom line
The win isn’t using AI for its own sake - the win is using it to create more space for the value clients actually care about.