AI – will it replace our financial advisors?

The big question that has come up in our industry with the rise of AI is whether or not it will replace financial advisors. This is an important question for Austen Morris Associates as we march steadily into the fourth industrial revolution. 


So, what is AI? In simple terms it is the attempt to merge human knowledge with computer-generated knowledge; in more complicated terms it is the application of mathematics and software code to teach computers to generate and synthesize knowledge. But how will this affect financial advisors? AI can and is being used to create robo-advisors that are able to use computer algorithms to provide relatively low-cost asset allocation and build automated portfolios for investors. It is a great option for investors that are new and do not have the funds to pay large amounts for an advisor. Robo-advisors have risen in popularity very quickly and have earned companies millions of dollars. There is now the fear that they will push human advisors out of necessity. However, this relatively simple idea is not as straightforward as it appears to be.

Despite being an easy, low-cost alternative, the biggest thing that robo-advisors and AI is unable to replace is the emotional aspect that comes with a human financial advisor. An advisor is often able to deliver key emotional support that is needed when investing and managing your money. The difference between a robo-advisor and a human advisor is often the level of advice you are seeking, and how much you are able to manage yourself.

Morningstar (2023)  offers the following questions to ask yourself when looking at a robo-advisor: 

  • Have you already covered all your financial basics? 
  • Do you want to set up other investment accounts to save for a specific goal? 
  • How complex is your financial situation? 
    • Investors with more complex assets and higher wealth may benefit from an in-person financial advisor as a qualified advisor can help one sort through any issues that may arise. The same goes for individuals who have people reliant on them for care. Someone with special needs will benefit from a personal financial manager. 

These questions offer insight into whether or not a robo-advisor will be able to give you the advice you need or whether you need not only a larger amount of help but the help only a human advisor can provide. 

The most important thing to consider, however, is how comfortable you are in managing your own financial planning and investments and whether you are happy with someone else involved in the decision-making process. If you need reassurance, you may want to consider a human advisor. 

With all these questions in mind, it becomes clear that robo-advisors will not replace or completely disrupt human financial advisors, as there will always be the need for the emotional support aspect that AI has not yet been able to replicate. 

In fact, one could argue that AI and robo-advisors could instead be used to make human advisors more efficient. One such way that it can be used is to manage smaller clients so that there is more time for human advisors to spend on the larger, more complex clients. Robo-advisors can look at aspects such as tax-loss harvesting, the rebalancing of portfolios and reinvesting dividends. Thus, robo-advisors can increase the productivity of our human advisors and help deliver better advice for more complex scenarios. 

Good investing, withdrawals and comprehensiveness is not just about science but is an art that only traditional financial advisors can fulfil. So, let us not fear that our advisors will be replaced by AI but hope that we will be able to use it to deliver our best to our clients. 


Money Matters 21 September 2023

Stocks mixed as US inflation accelerates Stock markets were mixed last week as an uptick in US inflation raised concerns that the Federal Reserve may

Money Matters 14 September 2023

Positive economic data weigh on stock markets Positive data from the world’s largest economy proved to be bad news for stock markets last week, as

Money Matters 7 September 2023

Stocks rise as US labour market cools Most major stock markets rose last week after US jobs data raised hopes of a pause in interest