Will AI Replace Financial Advisors? Here’s How to Prove Your Value to Clients - Morningstar

Right now, financial advisors are wondering the same thing as professionals in many fields: Will generative AI replace me?

While some may scoff at this question, the concern is legitimate. Generative AI tools already seem to provide personalized guidance to people asking for financial advice. Some generative AI tools market themselves as providing more services to their customers than traditional financial advisors do.

Potential for Losses to AI

Some of our previous research found that one of the top reasons people hire a financial advisor is to get help with a specific financial need. What happens to an advisor’s potential client pipeline if those same people turn to generative AI as their first source for handling their issues? Generative AI could spell trouble for financial advisors if it discourages people from hiring an advisor in the first place.

Generative AI also could eat into advisors’ current books of business. Advisors may always have business from delegators—people who want to hand off their finances to someone else. However, advisors could lose business from those who use them in a validator capacity if those people choose to bounce their ideas off generative AI instead.

The Value of the Human Difference

The growth of generative AI makes it more important than ever to understand why clients value working with an advisor. I personally don’t believe generative AI will replace advisors, because the value clients place in them is rooted in that human connection.

Across multiple studies, when we investigated what investors value in working with a financial advisor, we found three core advisor value benefits that emerge repeatedly. To stay ahead of the curve of generative AI, advisors should redouble their efforts in providing these values to current clients and demonstrating them to prospective ones.

- Behavioral coaching: Clients value working with someone who helps them make good decisions and stick to them.

- Goals-based planning: Clients value hitting their financial goals, but also receiving support for them along the way (for example, identifying them, adjusting them, and so on).

- Advice that is reliable and bespoke: Clients value not just personalized advice, but advice that makes them feel understood.

Generative AI may approximate these core advisor value benefits, but it will ultimately fall short for investors. For example, although generative AI may match some of the behavioral coaching advisors provide—like acting as a sounding board for a client mulling over investment options—it cannot do all of it, such as proactively helping clients stay committed to their investing plans through rocky markets.

Advisors can AI-proof their business by ensuring they deliver high-value service to clients in line with these advisor core value-adds. However, those endeavors will fall short if the advisor leans on AI so much that it replaces this value.

How Can Advisors Use Generative AI Without Replacing Their Value to Clients?

Advisors may be using generative AI in their work while also wondering about the safety of their profession from generative AI.

Generative AI has made a lot of promises to financial advisors: It can help them take better notes; create annual review presentations for clients; and even automate personalized interactions with clients. They can be more efficient and more accurate, while ensuring fewer tasks fall through the cracks. In turn, this frees up time for advisors to do more: either take on more clients or provide deeper services to their existing clients.

However, advisors must be careful not to let generative AI encroach on that value investors seek in working with a human advisor in the first place. Our previous research has found that overly personal uses of generative AI in financial planning can damage the relationship between an advisor and their client. This result makes sense when we recall that clients see reliable advice as something that comes from someone who understands them, which ultimately generative AI can never truly do.

So, when advisors are deploying generative AI, where do they fall? Are they using it for those generative AI capabilities like efficiency, or are they (perhaps unintentionally) using it to supplant their value in the eyes of clients?

Our latest research investigated how top advisors from around the world find value by using generative AI. We found advisors value their top uses of generative AI not because they mimicked the core advisor value-adds, but because they made good on the promise of generative AI capabilities to help advisors be more efficient (see image below).

Ensure Your Use of Generative AI Doesn’t Make You Replaceable

Generative AI is a new and shifting tool, so how can advisors ensure they continue to extract value from the tool without subtracting value from the experience of working with a human advisor?

Moving forward, advisors must strike a delicate balance to bring generative AI into their practice without supplanting their value. Advisors must weigh the value they get out of generative AI against the cost of using it. Aside from literal costs associated with using a generative AI tool, there are also more intangible costs associated with the loss of perceived value in working with an advisor. For advisors looking for guidance and structure for doing so, we developed a tool to help advisors evaluate their use of generative AI to ensure they have struck this balance (available in the full report).

In all, advisors’ core value-adds to their client base are not endangered by generative AI. Therefore, advisors should aim to fit generative AI into their practice in a way that enhances their service to their clients—without damaging that relationship.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.