Financial advisors had to deal with the rise of the internet, which equipped clients with plenty of questions and sometimes spurious answers. What does the rise of AI now mean for a new generation of advisors and clients? While it initially seemed that chatbots and their instant access to incomparable reams of information might take the place of financial advisors, research shows differently.
Key Takeaways:
- AI chatbots may have access to plenty of information, but that information can sometimes be wrong.
- While a growing number of young investors are using AI for financial advice, financial advisors still have a big role to play.
- By melding AI tools and their own ability to connect with people, financial advisors can adapt to an uncertain future.
A recent study on AI and financial advisors published in the Journal of Financial Planning dove deeper into the topic. The study exposed how results varied significantly across different chat bots. Suggested levels of emergency savings, for example, varied significantly. What’s more, the researchers found, results could even vary across user demographics.
Perhaps most significant is the variation across portfolio guidance between equity, cash, and alternative asset allocations. With its confusion across key rules and personalized advice, advisors may wonder how best to guide clients’ AI use. More than four of five millennial and Gen Z investors, for example, shared, in an AI-use survey, that they used AI for financial advice.
How Financial Advisors Can Adapt to AI
Those studies together paint a picture of investors using AI at a growing rate for advice, but getting advice that is, at best, questionable. How do financial advisors step into that picture?
For example, financial advisors can help clients understand how to get more out of those chatbots. Advisors can equip clients and investors with the language and baseline principles needed to know when a bot is right or wildly of course. In some cases, advisors could even develop their own AI tools and suites to offer to clients. That can streamline workflows and offer more value to clients.
Crucially, however, AI systems do not have a fiduciary responsibility to users. At the same time, personal information, like finances and financial plans, could be exposed if submitted to an AI chatbot for its consideration.
Of course, all of this is a backwards looking picture. In a conceivably near future, where most AI suites don’t make errors or major deviations away from recommended savings or best practices for those fundamentals, how should advisors react? The human element remains a key one. Combining that with savvy AI use, advisors can still retain an upper hand over a world of chatbot financial advice.
Perhaps the most impactful near-term step is for advisors to better understand how their businesses and other links end up in AI recommendations. How AI services like ChatGPT decide to prioritize links or information may become as important as SEO has been for the last two decades. It’s clear that human financial advisors still have the advantage — and can solidify that position by making shrewd moves in the present.
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