A client recently asked me how I think AI will improve financial planning. They also asked if I have concerns about how it might upend advisory relationships.
Every industry is trying to figure out what artificial intelligence will disrupt and replace. Financial planning is no different. The reality is I believe AI, when applied the right way, will dramatically improve financial planning, but not in the way most people expect.
The best financial advisors won’t be replaced by AI. They’ll become significantly more effective because of it. In fact, it’s showing up more prevalently in many of the tools we already use.
Financial planning involves an enormous amount of data. Tax returns, investment accounts, insurance policies, business financials, estate documents, retirement projections, employee benefits, and cash flow all have to work together.
Collecting, analyzing, and then tying all the information together in a format the advisor and client can understand has always been a herculean task, especially for clients with a lot of complexity. For example, we’re doing this level work for business owner clients, which involves their personal AND business financials.
AI can analyze information faster than any human advisor. Instead of spending hours gathering data, advisors can now spend more time interpreting what the data means and helping clients make decisions in real-time.
The entire process is faster and the advisor now has the capability of giving guidance at the speed of life.
Financial planning has many popular rules of thumb that advisors have historically relied upon. The more clients I serve, the more these conventional approaches are challenged.
Life is changing fast, the unexpected still happens, and more people need access to advice that works for their situation.
AI allows advisors to more easily model scenarios, test more assumptions, and identify opportunities that may have otherwise been overlooked.
The tools we currently use at Life Moves Wealth can project next year’s tax return, model the effects of a Roth Conversion, Social Security timing and income planning, range of values for a business based on prior financials, and so much more! And those tools are only getting better!
My favorite tool also allows clients to update their own financial plan data, see the effects in real-time, and know where they stand across their entire financial life in one easy to digest dashboard.
Clients don’t need or necessarily want more information. They want the right information they can understand and act upon. A savvy advisor with AI as their partner is able to evaluate the situation with greater precision and communicate what matters most in a clearer way.
You’ve probably seen at least one movie where a robot or some form of AI became sentient and processed, learned, and mirrored human emotion and some form of empathy.
While AI will undoubtedly develop some form of human-like capabilities, it cannot replace thoughtful judgment or the trust earned with eye contact.
It cannot sit across from a business owner who is deciding whether to sell a company they’ve spent 30 years building. Or, someone who was laid off a year before their retirement plan would have been fully vested.
It cannot help a family navigate a difficult inheritance conversation. It cannot hug a grieving widow at her love’s celebration of life service.
And it cannot understand a client’s values, fears, goals, and financial purpose the way a skilled advisor can.
There’s also a myriad of client data security concerns that is seemingly inherent with machine learning. With some AI tools, you have to pay a high subscription level to toggle off data sharing permissions. Even then, are we really sure of compliance?
The future of financial planning isn’t AI versus advisors. It’s AI plus advisors.
AI gives clients the opportunity to validate advice, especially if they’re unsure or want to take a deeper dive. It also gives clients alternatives when they feel they are being pitched a financial product.
The right advisor will see this as collaboration, not competition. We may find that easier said than done in some situations. However, I believe firms that embrace AI will spend less time gathering data and more time helping clients make better decisions.
After all, that’s where the real value of financial planning has always existed.
Disclosures
Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.
HYPERLINK DISCLOSURE – The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website and assume total responsibility and risk for use of the web sites you are visiting. We make no representation as to the completeness or accuracy of information provided at these websites. Life Moves Wealth Management is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website. Life Moves Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Life Moves Wealth Management’s web site or incorporated herein, and takes no responsibility thereof.
Author: Dale Shafer II, CFP®, CBEC®, APMA®
This website uses cookies to make sure you get the best experience on our website. You can find more information under the Privacy Policy.
