Liam Gibson, Wealth of Geeks
A recent Deloitte report predicts 78% of retail investors will use generative AI applications as an investment advice source by 2027.
Don’t be surprised if conversations with your financial advisor soon feel relatively automated — you might be chatting with a bot.
The financial advisory industry is poised for dramatic Artificial Intelligence (AI) disruption. If this comes to pass, AI will become the leading source of retail investment advice, outstripping friends and family, social media, and even your local financial advisor.
Deloitte foresees retail investors leveraging broad-based generative AI applications tailored for investment advice to help make decisions. However, this is broader than that of AI-native companies. Many legacy financial institutions will also offer AI-powered financial advice engines as clients gain comfort with investment tools that utilize artificial intelligence.
Industry insiders have mixed opinions on the degree of AI disruption investors should expect to see in the near term.
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Automatic advice
An AI takeover of personal finance seems a far cry from the present. From the combustion engine to the internet, the lag between invention and society-wide adoption of new technologies is often longer than initial forecasts suggest.
Yet, unlike previous breakthroughs, consumer AI tools require no new hardware. With a few clicks and ubiquitous internet access, users can conduct quick web searches to locate AI resources. Generative AI applications are within reach of anyone with a Wi-Fi connection, making it the first time a massive technological revolution has been available so quickly.
The speed of AI adoption sets this technological advancement apart from those before it.
“Deloitte’s prediction for 2028 might seem bold, but the rapid advancements in AI technology and increasing consumer comfort with digital tools make this plausible,” says Jorey Bernstein, founder of Bernstein Investment Consultants. “There are already several AI financial planning apps like Betterment and Wealthfront that offer automated investment advice.”
Online investing tools and consumer wealth-tracking applications democratize financial planning by bringing down barriers blocking resources reserved for professional traders and advisors.
These advisor platforms are intuitive to use — no Zoom meeting required. After signing up, consumers set financial goals and complete a risk assessment. The AI-driven platforms utilize responses to create and manage diversified portfolios. They also handle tasks like portfolio rebalancing and tax-loss harvesting, offering a hands-off investment experience with minimal fees and personalized advice.
With readily available tools like these, paying a financial advisor to allocate a portfolio makes less sense.
“Investment management is becoming a commodity,” says Angela Dorsey, Founder and Financial Planner of Dorsey Wealth Management. “Advisors who only provide investment management are vulnerable to being replaced by AI.”
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The human touch
Fortunately, many financial advisors likely have little to worry about when it comes to AI, as most offer services beyond investment management. Humans can delicately manage sensitive issues like estate and tax planning, offer broad life planning advice, and empower clients to achieve goals while assisting them during divorces or retirement.
Advisors believe this human touch has a competitive advantage.
“The value of a financial planner goes beyond investment management and is a dynamic, iterative, and ongoing process,” says Brett Koeppel, CFP and Founder of Eudaimonia Wealth. “Until artificial intelligence can empathize and connect on a human level, its value will remain limited to the technical aspects of financial advice.”
“Human advisors can maintain relevance by offering personalized, empathetic guidance that AI cannot replicate and by integrating AI tools into their services to enhance their value proposition,” says Bernstein. “We should also stay abreast of other disruptions like blockchain and fintech innovations, which could further transform the industry.”
Human advisors must also act as bots’ stewards as they delve deeper into business practices. Effectively delineating tasks and responsibilities is critical.
There may be chief concerns surrounding regulatory compliance and the complex liability issue. When technology-driven decisions fail, who is accountable when an automated system makes an error – the adviser, the technology provider, or the wealth management firm?
As AI rapidly integrates into the financial advisory industry, it promises to revolutionize investment management by making sophisticated tools accessible to all investors. However, not all advisors are worried. They see the human touch as indispensable to their craft. Advisors who effectively offer empathy, nuanced guidance, and support through complex life events will retain an advantage in this new age of generative AI content.
Yet advisors must also embrace AI tech’s power to automate monotonous admin tasks and achieve the analytical edge for forecasting and accounting. Tomorrow’s advisors will effectively leverage AI for technical aspects of the job for more time and energy to focus on delivering interpersonal coaching that only a human can.
Don’t be surprised if conversations with your financial advisor soon feel relatively automated — you might be chatting with a bot.
The financial advisory industry is poised for dramatic Artificial Intelligence (AI) disruption. If this comes to pass, AI will become the leading source of retail investment advice, outstripping friends and family, social media, and even your local financial advisor.
Deloitte foresees retail investors leveraging broad-based generative AI applications tailored for investment advice to help make decisions. However, this is broader than that of AI-native companies. Many legacy financial institutions will also offer AI-powered financial advice engines as clients gain comfort with investment tools that utilize artificial intelligence.
Industry insiders have mixed opinions on the degree of AI disruption investors should expect to see in the near term.
—————
Automatic advice
An AI takeover of personal finance seems a far cry from the present. From the combustion engine to the internet, the lag between invention and society-wide adoption of new technologies is often longer than initial forecasts suggest.
Yet, unlike previous breakthroughs, consumer AI tools require no new hardware. With a few clicks and ubiquitous internet access, users can conduct quick web searches to locate AI resources. Generative AI applications are within reach of anyone with a Wi-Fi connection, making it the first time a massive technological revolution has been available so quickly.
The speed of AI adoption sets this technological advancement apart from those before it.
“Deloitte’s prediction for 2028 might seem bold, but the rapid advancements in AI technology and increasing consumer comfort with digital tools make this plausible,” says Jorey Bernstein, founder of Bernstein Investment Consultants. “There are already several AI financial planning apps like Betterment and Wealthfront that offer automated investment advice.”
Online investing tools and consumer wealth-tracking applications democratize financial planning by bringing down barriers blocking resources reserved for professional traders and advisors.
These advisor platforms are intuitive to use — no Zoom meeting required. After signing up, consumers set financial goals and complete a risk assessment. The AI-driven platforms utilize responses to create and manage diversified portfolios. They also handle tasks like portfolio rebalancing and tax-loss harvesting, offering a hands-off investment experience with minimal fees and personalized advice.
With readily available tools like these, paying a financial advisor to allocate a portfolio makes less sense.
“Investment management is becoming a commodity,” says Angela Dorsey, Founder and Financial Planner of Dorsey Wealth Management. “Advisors who only provide investment management are vulnerable to being replaced by AI.”
—————
The human touch
Fortunately, many financial advisors likely have little to worry about when it comes to AI, as most offer services beyond investment management. Humans can delicately manage sensitive issues like estate and tax planning, offer broad life planning advice, and empower clients to achieve goals while assisting them during divorces or retirement.
Advisors believe this human touch has a competitive advantage.
“The value of a financial planner goes beyond investment management and is a dynamic, iterative, and ongoing process,” says Brett Koeppel, CFP and Founder of Eudaimonia Wealth. “Until artificial intelligence can empathize and connect on a human level, its value will remain limited to the technical aspects of financial advice.”
“Human advisors can maintain relevance by offering personalized, empathetic guidance that AI cannot replicate and by integrating AI tools into their services to enhance their value proposition,” says Bernstein. “We should also stay abreast of other disruptions like blockchain and fintech innovations, which could further transform the industry.”
Human advisors must also act as bots’ stewards as they delve deeper into business practices. Effectively delineating tasks and responsibilities is critical.
There may be chief concerns surrounding regulatory compliance and the complex liability issue. When technology-driven decisions fail, who is accountable when an automated system makes an error – the adviser, the technology provider, or the wealth management firm?
As AI rapidly integrates into the financial advisory industry, it promises to revolutionize investment management by making sophisticated tools accessible to all investors. However, not all advisors are worried. They see the human touch as indispensable to their craft. Advisors who effectively offer empathy, nuanced guidance, and support through complex life events will retain an advantage in this new age of generative AI content.
Yet advisors must also embrace AI tech’s power to automate monotonous admin tasks and achieve the analytical edge for forecasting and accounting. Tomorrow’s advisors will effectively leverage AI for technical aspects of the job for more time and energy to focus on delivering interpersonal coaching that only a human can.
