The financial advisory industry has faced many purported technological ‘threats’ over the past several decades. From the introduction of computers to the rise of the internet to the emergence of ‘robo-advisors’, there has been no shortage of innovations that would allegedly reduce the need for consumers to work with (human) financial advisors. But in reality, none of these advances meant the end for the advice industry; rather, they often made financial advisors more productive by increasing their efficiency with back-office tasks from producing financial planning calculations more quickly and accurately to being able to serve more clients across the country. But despite this history of technological advances actually benefiting the financial advisory industry, the emergence of powerful Artificial Intelligence (AI) systems, such as ChatGPT, has raised fresh questions about the future of human-provided financial advice.
While the capabilities of modern AI technology are quite impressive, it is important to recognize that AI systems would have to overcome significant trust hurdles before they would be in any position to replace human advisors. For instance, despite the rise of self-driving cars in recent years, survey data suggests that humans are hesitant about riding in them (or sharing the road with them) for safety reasons. This ‘trust penalty’ implies that self-driving vehicles would have to prove that they are significantly safer than human-driven cars (across a range of challenging driving environments, such as in a snowstorm) to achieve mass adoption. And because offering financial advice, like driving through snowstorms, often involves high risk and complexity, actually trying to replace human advisors with AI technology would be a terribly difficult and impractical place to start.
While AI systems are unlikely to replace human advisors anytime soon, their functionality could still help advisors operate more efficiently. For example, ChatGPT’s AI can be thought of as a form of calculator that takes inputs (e.g., various information or data that it’s fed or that it has ‘ingested’ itself) and turns them into useful outputs (e.g., written responses that conform to how humans typically communicate). In this way, ChatGPT can be used as a tool to help human advisors convey important financial concepts to clients through writing faster and easier. From the human perspective, the reality is that it’s typically far faster to edit something that already exists than to create it from scratch.
For instance, a human advisor could prompt ChatGPT to write an email in response to a client who is concerned about the current state of the market and wants to sell all of their equity holdings. And while it’s unlikely that advisors would simply copy and paste ChatGPT-generated text into a client email without checking its output, prompting ChatGPT and editing its output for accuracy and personalization is still likely to be faster than composing an email response from scratch. Further, beyond producing client emails, advisors may also find ChatGPT useful for summarizing lengthy text (e.g., creating succinct notes from a full client meeting transcript) or drafting social media content to promote content the advisor has already created.
Ultimately, the key point is that, in the long run, the most likely legacy of ChatGPT and AI for financial planning is not to replace financial advisors, but to help them increase their productivity by streamlining more of the middle and back office tasks and processes. Which, in turn, will either enhance the profitability of firms or allow them to provide their services at a lower cost for the same profitability while increasing the market of consumers who can be served, further growing the reach of financial planning. Or stated more simply, ChatGPT will not necessarily end out as a threat to financial advisors; instead, it is probably more of a useful tool for advisors that will help to grow the market for financial planning advice services!