AI Competency May Be the Next Fiduciary Requirement

 Are advisors really ready for AI?

No longer an emerging trend in wealth management, artificial intelligence has quickly become embedded in the industry’s infrastructure. More than nine in 10 advisors now use some form of AI-enabled assistant, with 85% saying generative AI is already helping their practice, according to the latest Advisor 360 Survey. That acceleration is reshaping more than just workflows. It is redefining the fiduciary duty itself. 

There’s a growing expectation for advisors to understand thoroughly the AI tools influencing their advice, an evolution driven as much by client expectations as by technology. Investors are increasingly demanding hyper-personalization — financial guidance attuned not only to life stage and risk tolerance, but also to tax nuances, liquidity needs, cash-flow patterns and personal preferences. A CFP Board study found that as early as 2023, more than half of investors were already comfortable using AI-driven financial insights, provided that a human advisor verifies them, and that number has presumably increased. This is the new reality, and AI is the foundation for delivering a higher level of personalization at scale. 

Despite AI’s seemingly endless capabilities, however, advisors must understand its limitations. In the same vein, advisors must understand and responsibly guide the engine behind the personalization.

The Algorithms of Advice

Although AI is widely touted as an efficiency tool, that’s only one point of impact. AI can also underpin portfolio models, workflow planning, tax analytics, product recommendations, rebalancing triggers and personalized scenario projections. That means the technology has quickly become integrated with the advice itself as an extension of the advisor’s professional judgment. A fiduciary standard built on “acting in the client’s best interest” cannot ignore that reality. If an algorithm shapes a recommendation, the advisor must be able to explain how the AI model works, where its blind spots and biases may lie and how outputs were validated, among many other elements.

Otherwise, the personalization risks becoming illusory, and potentially harmful to the client. Imagine this scenario: An advisor, relying solely on an automated withdrawal strategy, presents a retiring couple with a recommendation that shifts their portfolio to higher-volatility assets. The advisor assumes the planning platform correctly interpreted their cash-flow data without independently evaluating it. Weeks later, the couple suffers unexpected losses, partially due to the model’s known bias toward certain sectors during periods of low volatility. The advisor’s inability to explain the shift or the triggering data leaves the clients feeling exposed and distrustful, realizing the advice was based on a blind algorithmic misfire rather than tailored guidance.

Now consider the alternative: If the advisor had understood how the model ingests and weights spending patterns and tax-related events and makes longevity assumptions, the outcome might have been different. Had the advisor recognized the model’s sector-bias risk, they could have intervened by overriding misaligned guidance and acting on the recommendation in a way that might have better served the couple’s income-stability goals. In the right hands, AI becomes a powerful amplifier of fiduciary care: transparent, explainable and firmly grounded in human judgment.

The Market Isn’t Waiting

In the current environment, AI competence is not simply a technical skill, but also a trust requirement. Two forces are accelerating this perspective. Clients now expect precision. They want every aspect of their financial life reflected in their plan. Additionally, they often come to their respective advisors with their own data and pre-formed points of view, which, ironically, are likely shaped by consumer-facing AI tools. 

Regulators and governing boards are signaling higher expectations. The CFP Board recently published its Generative AI Ethics Guide to assist CFPs in using AI tools ethically and maintaining professional integrity. It sets the stage for AI competence to become a fundamental professional requirement. 

A Critical Blind Spot

Despite rising AI adoption, many advisors still feel under-prepared. Only about half report being satisfied with the technology, training and support they receive. That gap introduces fiduciary risk in several ways, including: misinterpretation of model assumptions, over-reliance on automated insights and inconsistent personalization that confuses or misleads clients. The risk isn’t that AI will replace advisors. Rather, it’s that advisors who aren’t adequately trained in AI usage could lose client trust, and in so doing, put their relationships and business at risk.

As AI grows in complexity, the broader ecosystem around advisors becomes increasingly more important. Providers of wealth management solutions and platform partners can all play a role in reinforcing responsible adoption by:

• Providing training that keeps pace with current and emerging AI tools.
• Offering guidance for selecting solutions aligned with diverse firm strategies. 
• Supporting thoughtful integration into existing workflows.
• Introducing governance frameworks that reduce risk and friction.

AI-Informed Fiduciary Duty. AI is not a substitute for professional advice. However, it is redefining fiduciary responsibility and rewriting the rules on what expert advice looks like. Advisors who pair their judgement with a strong understanding of the technology behind AI-driven hyper-personalization will position themselves to deliver deeper value and earn greater trust. Those who don’t comply with this inevitable shift may discover that the next competitive divide in wealth management will be drawn not between advisors who use AI and those who do not, but between those who understand it and those who don’t.

Greg Cornick is the EVP of wealth management solutions at Osaic, a portfolio company of Reverence Capital Partners and one of the nation’s largest providers of wealth management solutions, supporting approximately 11,000 financial professionals.