Why AI Poses a Mortal Threat to Financial Advisors

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Is there a subject that is more at the forefront of peoples’ minds than artificial intelligence (AI)? Depending upon one’s perspective, the thought of AI may cause feelings of hope and optimism or fear and dread. Despite our varied perspectives, many of us have begun using AI. For instance, Chat GPT is attracting 100 million users a month. Will AI’s every-growing intelligence supersede its creators?

It seems certain it will if it hasn’t already.

When I tried to read the entire internet in 10 minutes, I stumbled. One wonders if one day AI will decide that we humans are no longer vital.

Earlier this year, OpenAI revealed that ChatGPT-4 is a good test taker; it passed the Uniform Bar Exam, LSAT, and USA Biology Olympiad with “flying colors.” Moreover, Chat-GPT scored 155 on an IQ test. The average American’s IQ is 98.

In an article published in January by Psychology Today, Dr. Marylynn Wei asked, “Are AI chatbots the therapists of the future?” Considering the intimacy that must exist between therapist and patient, I found Wei’s question to be most interesting. As you may expect, the answer is “yes,” AI “psychologists” will provide therapy to their patients.

If AI can be a therapist, can it be a functioning financial advisor?

In my view, the answer is an unqualified “yes.” I believe this for three reasons: economics, psychology and novelty.

A definition

Let me define functioning financial advisor: I am referring to an AI avatar, in human-like form, that is capable of two-way, real-time discussions with clients. The AI advisor evidences expressions of emotion, asks and answers questions, gives suggestions, and then makes a recommendation of an investment product, investment and planning strategy or insurance product. This sounds like what you do, right?

Economics

When human-like AI financial advisors are introduced, they will exist within an economic structure that bears little resemblance to the business models that support human financial advisors. Because AI advisors require no financial compensation, human advisors will be unable to compete with their economic value proposition.

The companies or individuals sponsoring AI advisors will likely offer a wide variety of expense-free or near-free financial products. Moreover, the AI advisors will possess a level of knowledge that no human being can possibly match. Imagine knowing "everything" about every investment strategy, every investment product, every income tax or estate planning strategy, and every financial planning technique.

Psychology

An ever-growing body of research reveals that humans react to human-like avatars in the same manner that they do to other humans, exhibiting increasingly positive and empathetic responses to the AI as it becomes more human-like. Psychologists refer to this phenomenon as the "uncanny valley" effect.

According to research published in the academic journal Frontiers in Psychology, “Human-like to human stimuli show a positive linear relationship with familiarity. Secondly, we show that expressions of emotions in human-like avatars can be perceived similarly to human emotions, with corresponding behavioral, physiological and neuronal activations.” In other words, humans are going to like working with AI financial advisors. None of us should underestimate the gathering threat to human advisors’ business prospects implied by the psychodynamics of human to human-like interactions.

Novelty

Humans are sure to be fascinated by the novelty of interacting with human-like AI financial advisors. These AI avatars, which are becoming more and more human in appearance, are increasingly being referred to as “digital-humans.” According to ChatGPT, their human likeness combined with AI makes communication with digital-humans “feel real.”

Clients “working” with digital-human financial advisors will be subject to a novel and enjoyable experience. In fact, I envision that the experience between humans and digital-humans will be seductive for many people.

Here’s the danger: Human financial advisors will lose a share of their clients and engage fewer prospects if they are unable to match the novelty of AI interactions within the context of their personal brand.

ChatGPT speaks

I asked the ChatGPT if humans will be comfortable working with AI financial advisors. I show its response below. Pay special attention to the last paragraph:

Personalization and empathy

o Digital-human advisors can provide a personalized experience that goes beyond traditional robo-advisors.

o Their lifelike appearance and ability to understand emotions allow them to empathize with clients, addressing their financial concerns in a more human-like manner.

24/7 availability

o Unlike human advisors who have limited working hours, digital humans can be available round the clock.

o Clients can seek advice, review investment portfolios, or discuss financial goals at any time, enhancing convenience and accessibility.

Reduced bias and judgment

o Human advisors may unintentionally introduce biases based on factors like gender, race, or socioeconomic background.

o Digital-human advisors operate without such biases, ensuring a fair and objective approach to financial planning.

Consistent communication

o Digital-humans maintain consistency in their interactions. They don’t have “off days” or mood swings.

o Clients receive the same level of service regardless of when they engage with their advisor.

Data-driven insights

o Digital-human advisors can analyze vast amounts of data quickly.

o They provide data-driven insights for investment decisions, risk management, and financial planning.

Privacy and confidentiality

o Clients may feel more comfortable discussing sensitive financial matters with an AI-based advisor.

o Confidentiality is maintained without the risk of personal biases affecting the advice provided.

Adaptive learning

o Digital-humans continuously learn from interactions with clients.

o They adapt their responses based on individual preferences and changing market conditions.

Digital-human financial advisors combine the best of both worlds: the efficiency of AI-driven algorithms and the empathy of human advisors. As people become accustomed to interacting with AI in various aspects of their lives, acceptance of digital-human advisors will grow.

I found that last paragraph to be both fascinating and disturbing. “The best of both worlds?” Consider what this means. AI can grow ever more like us, but we cannot grow more like “it.” Perhaps this is why some in the upper echelons of tech wish to literally “merge” with AI? Maybe the Ray Kurzweils of the world know that we can’t “win” or “last” unless we merge with AI. After all, who among us doesn’t wish to remain competitive?

UX-driven defense strategy needed

Based upon the novelty that will attend digital-human financial advisors, human advisors must prudently adopt a strategy that will incorporate an AI presence into their client-facing user experience (UX). As I contemplate the threat AI poses, my strong sense is that the best defense for human advisors is to make their UX as novel and immersive as possible. Try to match the novelty and fascination.

We may well find ourselves in a “race to fascinate,” with humans competing with digital-humans to capture the imagination and loyalty of clients.

Advisors will need a whole new UX for anyone visiting their website. The current advisor website paradigm cannot stand up to the UX that the digital-human will provide.

Feeling of superiority?

ChatGPT thinks it’s better than us. It thinks that what makes us human makes us inferior. For example, it proffers that digital-human advisors are better than human advisors in these ways:

Unlike humans who may have varying moods or biases, digital-human advisors maintain consistent interactions.

Clients may feel more comfortable discussing sensitive financial matters with an AI-based advisor.

Confidentiality is maintained without the risk of personal biases affecting the advice provided.

Digital-humans analyze data objectively, free from personal judgments or emotional influences.

I’m confused. The AI wants to be more like us, including expressing emotions, but at the same time it feels superior to us due to our emotional makeup. Again, AI seems focused on its “best of both worlds” approach. Like us, but better than us.

How to process this

These AI events are a highly motivating threat and opportunity. I am trying to deliver a dramatically improved, AI-driven UX to the advisor community that can be acquired quickly and economically (this is why you haven’t read much from me lately. I’ve been working hard on this.)

Many advisors will benefit from a low-cost, outsourced digital-human solution that is solely focused on assisting the human advisor. It will leverage digital-humans whose job it is to build the image and promote the capabilities of their human bosses.

How many digital-humans do you have on staff? If the answer is “zero,” you should address this sooner than later. In the next year, we will see the introduction of the fully functioning, digital-human financial advisor. Once the companion TV and social media advertising campaigns are unleashed, the advisory world as we’ve known it will be forever altered.

My defensive solution will roll out in four stages, with discrete platforms for annuity agents, life insurance agents, retirement-income planners, and financial planners, in that order. You can see the annuity platform here.

Wealth2k® founder, David Macchia, is an entrepreneur, author, and public speaker whose work involves improving the processes used in retirement-income planning. He is presently focused on understanding and creating solutions to mitigate the threat to human financial advisors that is posed by AI.

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