Humanized advice will always be preferred to a deeply impersonal AI algorithm.
The rise of AI and other advanced technology will transform many industries—financial services among them. I predict in 10 years the financial services industry will be unrecognizable, due in large part to this technology. These tools create a shifting landscape—allowing consumers access to higher level planning calculations and information—without a traditional financial planner.
But these same tools will create a void for many consumers, as the emotionless and impersonal advice of an algorithm will always be in stark contrast to the human, empathetic advice provided by high-quality financial planners.
To give just one example, this week I helped a client navigate the administrative process of distributing her recently deceased husband’s estate.
Sure, a machine could have outlined the administrative process and provided the requisite forms. It could have calculated the value of the assets and maximized the estate distributions for tax savings and long-term wealth preservation. (And to be fair, I often rely on advanced industry tools to help calculate these types of figures.)
But the machine could not help her work through how these assets should be distributed to fulfill her husband’s unquantified wishes. It had no knowledge of who this man was and his relation to her or his beneficiaries. Without that humanity, it cannot kindly walk through this process with her—a process that needs comfort and empathy to assist in making tough choices.
Over the years I have worked through countless situations with clients that no AI could emulate. It turns out, AI cannot and will not replace some of the most important aspects of a human when it comes to gratifying financial planning.
Emotional Intelligence Is Not Optional
Great advisors possess emotional intelligence, something a machine can only imitate—inauthentically at best. The ability to recognize, understand, evaluate, and at times, empathize with clients’ needs is a skill only humans possess.
Why is this so important? Well, when it comes to building a financial plan, often emotional desires drive the plan more than impersonal calculations.
Think about all the financial choices in your own life—maybe a few of them are driven entirely by numerical outcomes—but most are rooted in something intangible. Financial decisions are made by weighing outcomes, and sometimes the preferable outcome is not just the most money in your investment portfolio.
Have you ever thought about taking another job you might find more fulfilling even if you earn less? Or putting your child’s college costs ahead of early retirement? Maybe you tithe to your church—certainly that’s not a financial choice that a computer will advise to lead to your “best” financial outcome.
AI algorithms do not contain any emotional intelligence, but are solely based on information available to its system. This means the advice you receive is simply a compiled data set that is often a one-size-fits all analysis. I challenge you to ask it something you are grappling with financially; it will churn out a excessively long “answer” that gives a set of data points and no true guidance. This does not help you navigate these hard choices effectively.
Humanized advice versus the deeply impersonal AI algorithm.
AI can analyze historic data and trends, but if you need a solution that goes beyond the established patterns it will require integrating quantitative factors (investment strategies, tax implications) with the client’s values and aspirations. No machine can capture this dance, you must humanize your plan.
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