AI Not Advisor Replacement, but Could Be a Helper

Amid the rapid expansion of artificial intelligence (AI), there’s significant chatter that this technology will replace tens of thousands of jobs – perhaps more – currently occupied by humans.

Owing to advancements in generative AI, there’s widespread speculation that this technology will eventually usurp some high-paying white collar jobs. Add that to the increased intersection of technology and investing and it’s not surprising that some registered investment advisors are fretting that computers and robots will eventually steal their jobs.

For advisors, there are multiple reasons to stop worrying. First and more broadly, the prevailing wisdom is that AI will not replace advisors. After all, robo-advisors didn’t do that. Second, scores of studies and surveys confirm an important: Clients like a human touch. They can’t get that with AI. Finally, AI technology is not yet advanced enough to make investment decisions, let alone do so across a broad swath of client portfolios.

Put it all together, and the outlook for advisors vis a vis AI isn’t as dour as initially expected. If anything, advisors can harness AI to improve their practices.

Moving Past AI Fears

In their early stages, some disruptive technologies illicit fear. That’s certainly been the case with AI, but this technology faces significant barriers in terms direct interaction with humans and dispensing credible investment advice.

A similar trust hurdle applies to AI and financial advice. There are situations where AI can deliver quick and easy financial advice. If you ask AI, ‘What’s the lowest-cost way to get exposure to the U.S. stock market?’—it will provide a great answer,” notes Morningstar analyst Danny Noonan. “But there reaches a point of complexity where AI hits a wall. There were many articles during the rise of robo-advisors that declared that robots were going to put financial advisors out of business.”

In other words, one ask ChatGPT the above question and probably get a response involving exchange traded funds or index funds. However, when asking AI to do something more complex, say build a 60/40 portfolio for someone in a specific age or salary range, the technology is likely to falter.

A key lesson from the rise of robo-advisors was finding out that a portfolio is not the same thing as a financial plan. A strong financial plan goes beyond asset allocation. Advisors well versed in financial planning, estate planning, tax planning, and insurance can easily differentiate themselves,” adds Noonan.

Said another way, the likelihood of AI ever getting to the point, let alone it happening soon, to where it can offer the curated advice and planning of a human advisor is scant.

Working With, Not Against AI

Some advisors may be apt to frame AI as a direct rival to their financial well-being. They should reconsider that view because while AI doesn’t have a place in investment selection, estate planning and the like, it can be additive on other fronts relevant to an advisory practice.

“For advisors who leverage social media for business development, AI can make posting on LinkedIn more efficient. For instance, if an advisor writes a blog on estate planning and wants a one-sentence executive summary plus brief bullet points, this is where AI excels,” concludes Noonan. “Advisors could simply paste a link to their article in the AI prompt, provide instructions and a request for a few versions of the summary, pick their favorite, and post to LinkedIn. A job that previously took a half-hour or longer might now take five minutes.”

Additionally, the potential exists for AI to be a boon for advisors in terms of practice efficiency, particularly when it comes to back office and client relationship management tasks.

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