Some of you might have noticed that I sent out a bit of a rant about all the blogs, webcasts and articles proclaiming that AI will not replace financial advisors. Why (I wondered) does this topic even come up?
I saw articles like this when the first planning software programs were introduced in the early 1980s, and again when the so-called robo-advisors were announcing that financial planners were overpriced and unnecessary. The underlying message is that technology will eventually replace humans in our profession—just not yet.
I’m a big fan of technology replacing a lot of rote functions and bringing new analytical insights to the human advisors who are courageous enough to employ its full capabilities.
I also believe that advisors need to stay one step ahead of an encroaching tide of commoditization. Simply projecting the size of a client’s portfolio at ‘retirement’ (another rant), and comparing that with projected expenses, is easily within the realm of pre-AI technology—much less the world we find ourselves in now. So is creating a diversified portfolio.
But anybody who needs reassurance that AI won’t replace their role as an advisor, or anybody who believes that you need that reassurance, is smoking some pretty strong stuff.
So what would a more intelligent take on AI look like? I received several messages after sending out my rant, which offered a few insights. Clark Blackman, of Alpha Wealth Strategies in Houston, TX, pulled out the oldest (still true) insight into advisor-client relations: “People don’t care how much you know until they know how much you care.” AI is full of knowledge, but how much can it care?
George Gagliardi, of Coromandel Wealth Strategies in Lexington, MA, wrote that clients and consumers generally will never completely trust whatever comes out of an AI computer interface—especially when it comes to the most important aspects of their personal journey.
“Clients will still want a human to interpret them, put them in the context of their actual situation, and understand the nuances that make every client different,” he wrote. In other words, advisors are clients’ interface with AI.
The longest and most thoughtful comment came from David Jacobs, of Pathfinder Financial Services in Kailua, HI. In his previous life, Jacobs was an AI researcher, who follows new AI developments as they’re unfolding. He listed some key limitations of large language models (LLMs) currently: they don’t apply what they learned in a ‘conversation’ with one person to a conversation with another (spouse); they don’t get better with non-training experience.
Also: they are not good (I would say terrible) at sharing how much confidence they have in any statement they make. (They always project 100% confidence, even if the response turns out not to be accurate.) Any advisor will tell you that one of the fastest ways to build trust with another person is to confess that you aren’t sure of the answer, but you’ll get back to them when you are.
And LLMs only respond to prompts; they don’t initiate conversations themselves. I might add that they lack curiosity, which is a key trait for advisors when they’re learning about their clients and applying that to their planning advice.
But here’s the interesting part. Jacobs says that he’s seen younger people trusting AI far more than most of us do—as simulated best friends, as therapists and even coaches. To stay ahead of AI, Jacobs recommends that advisors pursue a very narrow and deep niche, where you have much more deep expertise than AI with its access to generalized financial knowledge. You can learn from your clients and get better and better, Jacobs wrote, while the AI competition will stay the same.
Even more interesting, Jacobs suggests that advisors not put too much of their knowledge out there into social media for marketing purposes, because then it becomes fodder for the next generation of AI. In other words, don’t help the silicon competition learn too much about what you do and how you do it.
Caring, interpreting, curiosity and deeply learning are advantages that human advisors have over AI, and they are all part of what you do already. Instead of roundly asserting that AI is not a threat, let’s instead explore the ways we can use it, and how to move to higher ground as AI (as all technologies do) raises the tide of commoditization around our feet.