(The Ascent) - Artificial intelligence (AI) has been transforming various industries, and the financial services sector is no exception. With the rise of robo-advisors and other AI-powered financial tools, many are wondering if human financial advisors will soon become obsolete. Let’s explore the pros and cons of AI-driven financial advice and assess whether AI is likely to replace your financial advisor anytime soon.
Key points
- Artificial intelligence can now parse large amounts of information and explain the abstract in simple terms, two key parts of the financial services industry.
- Limitations of the technology include building a qualitative and quantitative context through ongoing discussions.
- In the near term, humans and bots will likely team up to bring you financial advice.
The case for machines
Did that introduction sound a little off to you? If not, the AI revolution may be closer to your doorstep than you think. That paragraph was generated by ChatGPT, a powerful artificial intelligence engine that you can communicate with in plain English. And after exchanging dozens of messages back and forth with the bot, one thing is clear to me: many industries are about to change.
The financial services industry was long believed to be impenetrable to the clunky AI of years passed. What bot could balance the nuances of the many facets of personal finances? Today, however, artificial intelligence can gain 40 years of experience in a few seconds, presenting IRS rulings and fund prospectuses alike better than even the most book-wormish CPA or CFA. When it comes to AI, the question is not whether it can outcompete a human, but whether it can replace every function today's advisor can perform.
As a financial planner, I pride myself in my ability to communicate about complex topics in layman's terms. But that skill is no longer in short supply. ChatGPT and many other artificial intelligence programs can do just as well as I can, if not better. I spent half an hour asking the bot a variety of highly technical questions. In addition to providing a correct answer almost every time, it generally provided a response written at a high-school reading level.
The case for men and women
So, is my job toast? Not yet. Human advisors still hold the upper hand against the current generation of machine learning bots.
For one thing, humans generally prefer to work with other humans. A 2020 study found that 84% of Americans would rather work with a human advisor than a so-called robo-advisor. There is a concept known as the "uncanny valley," which argues that as robots get closer to emulating human characteristics, like speech, humans become more distrustful of them. And while robots are getting better at disguising themselves as humans, as represented by the introductory paragraph, they are not yet there. That's why many people and some search engines are able to identify AI-generated writing.
Another challenge that artificial intelligence faces in the financial planning world is that of asking good questions. While a human advisor can ask a tactically pointed question to choose the best of many options, artificial intelligence, at least as of now, tends not to talk back. Most financial planning conversations include back and forth, establishing both qualitative and quantitative guidelines before offering recommendations. Talking with artificial intelligence is, at least for now, a one-sided conversation.
The future of financial planning
The financial services industry is one of the more tech-forward professional industries. This allows a unique opportunity for human advisors and AI to team up in order to best serve clients.
An advisor and her artificial intelligence engine may work best in tandem. The human can build context, and ask the AI engine the right questions, all while adding that human touch. With the right questions, the AI engine can offer more pointed solutions and provide the data to back them up.
"In conclusion, while AI is advancing quickly and has many applications in the financial world, it is unlikely to completely replace the human element of financial advising anytime soon. Instead, the future of financial advising will likely involve a complementary partnership between humans and machines." -- ChatGPT
By Charlie Pastor, CFP®
March 17, 2023
