Rise of the Machines? Not So Fast for Financial Advisory Jobs

Despite the abundance of scary headlines about artificial intelligence, next-generation financial advisors and early-career practitioners appear to see more potential in it than doom.

There is some caution, but some say the technology will augment their work rather than replace them. And AI shouldn’t necessarily flatten fees, but advisors may have to offer more services and human interaction to earn that 1%.

One future advisor at the University of Missouri, Tristan Ragsdale, said he’s more excited than worried about AI’s impact on the field.

At his summer internship, he used firm-approved AI tools to keep client data protected, in addition to employing it for basic work, such as drafting emails from meeting notes and building client meeting agendas. But it also supported more complex tasks like mapping how a client’s multiple businesses connect. AI helped him do all of that faster, he said. At conferences he’s attended, he’s heard advisors raise concerns about data security, accountability and compliance.

“Embracing AI doesn’t mean trusting it blindly. It means knowing the tools well enough to verify their work, so the trust clients place in us is earned,” Ragsdale said in an email.

Domo Arigato, Mr. Roboto

Miranda Reiter, associate professor at Texas Tech University’s School of Financial Planning, said her master’s level and undergraduate students are optimistic about their careers in the age of AI. Postgraduate students are also working professionals, and they have told her AI supports them with notetaking, streamlining processes, searching for information and even portfolio building.

In late September the university held an event with employers, alumni, sponsors and students to focus on financial planning, and one of her undergrads had 11 interviews. 

“I don’t think she was necessarily unique,” Reiter said. “Students are not necessarily, in our program, seeing that [they] have a lack of career prospects in the age of AI.” What will matter is building up soft skills and developing more emotional intelligence, she said.

Survey data this year from the FinServ Foundation and FP Transitions support those points:

• 40% of respondents said evolving technology makes the profession more appealing and may enhance efficiency while strengthening the client experience.
• Still, 47% also said they’re concerned AI will eliminate some entry-level jobs. 

And it seems that students are seeking companies that have some human element to them, FinServ Foundation President Jamie Hopkins said. Over the past 12 months, more students have come into the industry and said they aren’t sure if they want to work at a pure technology company, a departure from previous years, a trend that is likely to continue, he said.  

Wall-E Street

Meanwhile, companies are developing AI software to assist or even replace advisors. For example, Altruist has Hazel, a wealth platform for independent advisors, and others, such as Origin Financial and Evergreen.ai, are creating AI financial advisor platforms.

Evergreen.ai is still in beta for now, said Bill Harris, founder and CEO, who sees an “upheaval” in the way advice will be delivered. What’s key is that the AI is tailored to financial advice, avoids hallucinations and can handle the complex financial questions that generic large language models struggle with. “AI can be very powerful, if it is special-purpose,” he said.

DIY investors are likely to use AI advisors, but people who delegate their decisions to advisors may not be ready to trust AI at least in the next decade, Hopkins said. The rise of deep fakes and AI attacks might force people back to more in-person client meetings. “I believe we’re going to a zero-trust environment,” he said.

AI could increase demand for advisors — if it makes advice more affordable for those who currently aren’t served, the sources say. A 2023 survey from Retirable shows that 67% of people over age 55 have not met with a financial advisor to create a financial plan. It’s been a struggle for advisors to profitably help people with less than $1 million to invest. There’s also a projected shortage of 100,000 advisors by 2035 — and an AI transformation may be necessary to help with that gap, according to a McKinsey & Company report in January. 

“The first place that AI is going to come in is not displacing the humans, but rather making good advice available more broadly,” Harris said.

Working Harder for 1%. If AI makes things cheaper and more efficient, a hierarchy could evolve, not unlike how people who use robo-advisors pay less and get less hands-on advice, Reiter said.

Fees have started to rise across the industry, now at an average of 1.41%, if internal costs are included, Hopkins and Harris noted. Increased use of higher-cost actively managed exchange-traded funds is part of the reason for that.  

While the standard 1% that advisors charge clients for a more bespoke relationship isn’t likely to go away, they will need to tap into their soft skills to stay ahead of the machines. Advisors should prepare to deliver more value in coming years by offering clients estate planning advice, trust services and other financial-planning needs.

“If you can’t deliver tax advice in two years or file taxes for clients in two years for essentially the same thing, I do believe that your business is going to start to struggle,” Hopkins said.