We have heard from Fintechs and media outlets proclaiming that AI will evolve to a point where it will replace all financial advisors. While it may bring tremendous efficiencies to those in the industry and bring services to more people, it will not supplant human advice—especially in the realm of high-net-worth wealth management.

Wealth Management Is A Niche Service
For centuries, families of wealth and nobility retained the services of a majordomo to oversee and advise on matters of business and wealth. Like family office professionals do today, these trusted advisors used their deep technical and personal skills to support and guide families through tumultuous or transitionary times.

Artificial intelligence, including generative AI, will not overthrow this centuries-long practice. Instead, AI will support modern-day financial advisors by speeding up labor-intensive tasks and automating repetitive ones, allowing more time for a value-additive & client-focused experience.

It will increase the amount of preparation and evaluation we can do by conducting research, reviewing documents, analyzing massive data sets, and flagging items for review. It will allow us to spend more time with clients and expand our skill sets to serve their families better. These AI tools themselves will represent a new challenge for advisors to wield with the oversight and acquired wisdom of experience that only humans can provide.

Clients Recognize The Value Of Human Interaction
History has repeatedly proven that people want to interact with a human professional to manage their finances—as long as that relationship adds value.

Technology that allowed individuals to easily trade securities online supplanted brokers who facilitated transactions and had incentives to provide biased advice. Passively managed index funds pushed down mutual fund expense ratios and reduced active investing because they showed that human analysis was often counterproductive.

But successful human advisors now incorporate low-cost online trading and ETFs into broader financial plans tailored to each client’s circumstances, goals, and risk tolerance.

Even robo advisors have not decimated the financial advice industry despite their potential to automate portfolio customization, portfolio rebalancing, and tax loss harvesting. Their use actually declined in 2022, especially among investors with more than $500,000 in assets.

Robo advisors, who were once heralded as the next evolutionary phase of the traditional financial advisor, have fallen short in recent years. A 2021 SEC examination highlighted how these automated investment platforms, even ones that claim to provide customized advice, can fall far short of their promises to clients.

The commission found numerous problems. New client questionnaires didn’t ask enough questions. Firms didn’t re-evaluate clients’ circumstances and objectives periodically, nor did they sufficiently oversee their automated investment platforms, leading to trading and portfolio-rebalancing errors. Programs that claimed to provide individualized advice often provided identical or similar advice to numerous clients.

While AI promises to improve upon these flaws, they are only as good as their human inputs and oversight. In the realm of personal finance, navigating uniquely human problems is found to be best done by well… Humans.

Humans Are More Effective Convincers
Extensive conversations with a financial professional are what generate the trust, buy-in, and accountability that allow clients to enjoy successful outcomes. An advisor can convince a client that a business plan isn’t sound or that it’s a good time to allocate more assets to stocks even though prices are falling. But they won’t do it through hard numbers alone. They’ll do it with their voice, their body language, and their stories.

Human connection can be especially important when we want advice and support from someone who understands where we’re coming from. AI does not have the lived experience to delve into a client’s dreams, fears, and aspirations surrounding their family’s wealth. It hasn’t experienced grief or financial trauma. It can be programmed to say reassuring and even helpful things, but ultimately, it will be the first to explain, that it cannot feel emotion or empathy.

AI Can’t Manage Family Dynamics
Family governance can be tricky. The people who influence and are affected by generational wealth planning may not communicate well (or at all), may fail to see others’ perspectives, and may not be open to change.

Yet, interpersonal dynamics can make or break generational wealth planning, and the relationship managers in family offices are equipped to manage those dynamics. As neutral third parties, they can suggest ideas that might be poorly received coming from a family member. They can implement systems to protect the best interests of a matriarch and her grandchildren without alienating the second generation.

High-Level Financial Planning Is Complex
There’s a reason why wealthy people have professionals prepare their tax returns, and it’s not just because they have better things to do with their time.

Clients whom we serve are masters of their own craft, who have built a business, navigated their families through trying times, or helped their community in profound ways. But the realization often comes that by seeking professional help, they will better serve themselves and their families. Partnering with an experienced guide who will help them ask the right questions or consider things they may not have realized. 

Most people don’t understand the nuances or even the basics of the tax code. They don’t realize that decisions about when to exercise a stock option or whether to turn a home into a rental property can have costly tax implications. But they are aware enough of their ignorance to seek expert help.

AI can excel at being a thought partner when you know what questions to ask. If you don’t know where to begin, however, it presents solutions that aren’t specific enough to your situation.

Further, when considering a multigenerational family with a sophisticated wealth structure, AI may not be able to see the big picture. It takes human expertise to assemble siloed recommendations and translate them in a friendly and understandable way to a client.

Final Thoughts
Tech-driven processes have an integral role in supporting financial planning and advising. As technology evolves, with other industries rushing headlong into the latest innovation, wealth management will remain a stalwart of human connections.

In fact, as AI becomes more sophisticated in answering technical questions, the value of financial advisors with strong interpersonal skills and good judgment will only increase. Advisors who understand the complexities of holistic planning and emphasize communication, trust, and ethics will continue to be indispensable to their clients’ success. This coexistence is not one of competition but collaboration, ensuring that the heart of wealth management—the human touch—remains paramount in its significance.

Derek J. Cavanaugh, CFP®, is a Family Wealth Associate at Pitcairn, a multifamily office with $7 billion in AUM celebrating a century in business.