How Financial Advisers Can Thrive in the Age of AI
When I speak with financial advisers about artificial intelligence, I often hear the same concern. Many are worried that AI will eventually replace them.
I understand the fear, as it seems that every major new artificial intelligence technology comes with predictions that this time the profession is finished. The headlines are certainly not helping, as every week there seems to be another article explaining how AI can build portfolios, answer financial questions, analyze investments or generate financial plans in seconds.
For many advisers, it may feel as if AI is attacking the very value of the practice they have spent years building.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
I think that perspective misses what is actually happening.
The clients using AI are not trying to replace their advisers.
They are simply trying to become better clients.
And that distinction may be one of the most important aspects for a financial adviser to understand, and when they do, I believe it will shed a new and exciting light on the future of our noble profession.
The empowered client
For decades, many clients walked into meetings feeling overwhelmed. For your clients, financial planning can be intimidating, which is exactly why they want to work with you.
Investment terminology can feel like a foreign language. Tax code, retirement income strategies, estate planning techniques and risk management concepts are not subjects most people spend their weekends studying.
As a result, many clients sat quietly through meetings, nodded politely and left without fully understanding what had just been discussed or what action they took in their portfolios.
AI is changing this.
Clients are becoming empowered through AI and can now ask questions whenever they want. They can learn the basics of Roth conversions, Social Security strategies, charitable planning, annuities, investment management and countless other topics within minutes, but here is the key: They arrive at meetings empowered and with more information than ever before.
They no longer have to sit there and nod politely as you explain why you believe duration risk needs to be accounted for in this market, without a clue about what “duration” means.
Many advisers see this as a threat, but I see it as an opportunity because an informed client is often a more engaged client, and a more engaged client asks better questions, which leads to deeper conversations.
These deeper conversations create stronger relationships.
The adviser who embraces this rather than fights it may find that AI does not weaken the client relationship but may actually strengthen it.
The emergence of the ‘confidently wrong’ investor
Of course, there is an important caveat.
More information does not always create a better understanding.
AI can not only help your client feel more empowered, but it may also create a uniquely new AI-driven challenge: The confidently wrong investor.
That may become one of the most important issues for financial advisers in the next decade.
AI is trained to sound authoritative, but it is not trained to always be correct.
AI hallucinates more often than people realize. It can confidently invent IRS rules, estate planning strategies, tax interpretations and legal concepts that simply do not exist.
Sometimes it pulls from outdated information. Other times it blends accurate information with misinformation in ways that sound incredibly believable.
The important thing to understand is that AI does not feel embarrassment the way you or I would if we confidently gave somebody the wrong answer over coffee. It does not pause and think that it should double-check things. It simply delivers information with remarkable confidence, whether the answer is accurate or completely wrong.
That changes the adviser’s role, as I believe the future adviser becomes something very different.
The rise of the ‘Epistemic Adviser’
That is why I think advisers who fight AI are making huge mistakes. The future adviser is no longer the person hoarding information. The future adviser is the person helping clients navigate information.
That is a much more meaningful role.
I call this role the Epistemic Adviser.
Now, I realize that sounds like something a philosophy professor would say, but the idea itself is simple. An epistemic adviser is somebody who evaluates the quality of knowledge before a client acts on it.
Who said my liberal arts degree was useless?
An Epistemic Adviser is a knowledge quality inspector. Your role is no longer simply delivering information, but it is now evaluating its quality before a client acts on it.
That is a very different profession.
And here is the key: You will use AI to become the Epistemic Adviser!
You encourage your client to use AI if they want to. You will both use AI in a manner compliant with your firm. Both AIs will recommend a Roth conversion, but you are the one who knows the human side of the client, and getting her to write a $182,000 check to the IRS is something she will never do.
Both AI recommendations were for a gifting program for estate tax purposes, but the client forgot to tell the AI that she lives in Illinois, which has one of the most complicated state estate taxes I have ever seen.
Are you starting to see my point?
Both you and your client are both using AI, but you, as the Epistemic Adviser, are essential to sort it out.
The difference between knowledge and judgment
This is where advisers become more valuable, not less.
You see, you are not competing with AI. You are helping clients navigate it and think about what they are really asking for.
With the endless supply of information, they are not asking for more information. They are seeking confidence that they are making the right decisions and in the right context.
They are asking for judgment.
They are asking for someone who understands how financial decisions interact with real life.
AI may recommend delaying Social Security benefits, but it is the adviser who understands the client’s health concerns.
AI may recommend a gifting strategy, but it is the adviser who understands family dynamics and state-specific considerations.
You see, the difference is not information.
The difference is judgment.
Closing thoughts
As we move forward, I believe advisers should stop viewing AI as something happening to them and start seeing it as something they can use alongside their clients.
If the client is so inclined, encourage them to bring AI-generated ideas into meetings.
- Discuss those ideas openly
- Explore them together while validating what is useful
- Explain what may be missing and help them understand not only the answer but also the reasoning behind it
Clients are not looking for replacement.
They are looking for empowerment.
And advisers who help create that empowerment may find themselves more valuable than ever in a world where information is everywhere, but wisdom remains remarkably scarce.
