Will AI replace financial advisors?

I used to be very against grocery delivery services, but a friend recently recommended a Walmart+ subscription. I gotta say, it's amazing. I didn't realize how much time it saves. AMEX Platinum offers a Walmart+ refund, which makes it free. I don't want to be dramatic, but it may be life-changing.

We can all thank Austin for today's question. Thank you, Austin.

Short answer: no. Slightly longer answer: I hope it does for 90% of the population, but it won't.

Even longer answer:

In general, I'm pro-AI. I believe it's a tool that will improve efficiency. For every job it "eliminates" (by allowing one person to do the work of two), it will open doors to new opportunities.

For wealth management, I'm all about implementing AI. I have a significant portion of my investments in a Schwab Robo-Advisor and have praised it multiple times. The Robo-Advisor follows time-tested principles of diversification. After I answered a few questions, the robot invested all my funds, rebalances the portfolio as needed, and reinvests any dividends without needing to talk to a wealth manager.

A team at Schwab wrote the rules, validated the robot, and released it to the masses. A 2020 report from Schwab showed 373,000 active robo accounts with an average balance under $100k. That's hundreds of thousands of people who now have diverse, time-tested portfolios for free or a small fee with their premium option.

ChatGPT can help build you a step-by-step plan detailing emergency savings, short and long-term investment options, term and whole life insurance, and tax-advantaged accounts to round out your robo-advised portfolio. If you want to truly maximize returns without fees, AI (and the Dollar Debrief) are free resources that make it easier than ever.

I firmly believe that for 90% of people, this is more than sufficient. However, I realize that talking to a human who can talk investors off the ledge during a recession or explain a REIT will always be priceless. You can't beat the human touch, and some people will never trust robots with their money. For that reason, AI won't replace financial advisors anytime soon.

For the top 10%, AI will not replace wealth managers, but it will improve their performance. Advisors can and are using robo-advisors to manage portions of assets invested in long-term, non-speculative accounts. They're using AI to analyze deals, run models, and monitor real-time data.

For the top 1%, wealth managers provide far more services than just investing in NVIDIA. They provide access to deals requiring relationships like off-market real estate and private equity funds. They help advise high-net-worth clients on tax strategies, charitable donations, trusts, and wills. They (hopefully) implement solutions that cover their fee plus a lot more.

So, no. AI won’t replace financial advisors. Until the tesla robots come out, they will never beat the human touch and comfort provided by talking to an advisor.

Debrief on Deck

Next week, we can all thank Jack for asking about all these economic reports that flood the news cycle. CPI, PPI, PCI, Jobs, Jobless Claims - it's like alphabet soup, but less tasty and more likely to move your 401(k). I'll break down what they measure, when they're released, and which ones you should actually pay attention to.

As always, please reach out to us with any questions or comments you have. You can reply directly to this email or find us on Instagram.

Until then, stay the course.

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