Behavioral finance experts on the benefits of becoming superhuman wealth advisors in the AI era

From companies like IBM announcing plans to automate thousands of jobs to AI-powered music artists successfully spoofing the world's biggest pop stars, artificial intelligence is an industry that has grown into a certified headline generator almost overnight.

But as the eye-catching stories pile up, AI's potential impact on the financial advice industry looms heavy. One of the challenges, according to psychology of money expert Brian Portnoy, is the sheer speed at which the technology is moving.

That's why when attempting to break down what it means to be more human and provide human-first advice in an AI era, advisors should start by asking the right questions.

Brian Portnoy
Brian Portnoy, founder of Shaping Wealth

"Things are moving too quickly. We don't know. You don't know. ChatGPT-4 replaced Chat GPT-3.5 … I mean, this is happening in the space of weeks, not years," said Portnoy, the founder of Chicago-based behavioral finance consultancy Shaping Wealth and one of FP's 23 people who will leave a mark on wealth management in 2023. "So we're not going to try to be overly foolish in trying to predict the future. We kind of think that the power of questions matters here."

Last week, Portnoy and Betterment Head of Behavioral Science Dan Egan searched for those right questions as Betterment, he nation's biggest independent robo-advisor, hosted a discussion about how AI is already transforming the business.

Introduced by Alyssa Seidl, a strategic sales manager on the Betterment For Advisors team, the event was focused on helping advisors leverage the disruptive power of AI, and on highlighting important strategies to keep in mind.

"You know, with AI becoming so popular in today's world, it provides a really unique opportunity to outsource routine tasks in order to drive more productivity," Seidl said. "But also, it's important to remember the significance of keeping the human element and using that human interaction in your business to continue to deepen client relationships and differentiate yourself." 

Diving into the topic, Portnoy presented Egan with what he called a "middle of the fairway" question: How will artificial intelligence impact the market for financial advice? 

"The more extreme question. The more dramatic, movie-based, Skynet element to it is, will the next wave of robots replace humans in the provision of financial advice?" Portnoy asked. "If we're talking about the impact on the market for financial advice and how AI cuts through, markets have a supply side and a demand side. On the demand side, who are the customers for financial advice? Who's going to want something called financial advice in the age of artificial intelligence?

Egan, who has a background of using behavioral finance to help people understand how they can make better investment decisions, said his "middle of the fairway answer" is that AI won't put advisors out of work. But it will change the work that advisors do and what they spend the hours of their life doing.

"It's the standard technology answer," Egan said. "You don't want to compete with (a) technology that is very inexpensive and deployable and scalable and they can get access to it at 11:30 on a Saturday nigh. On the other hand, there's a lot of the core components of good financial advice leading to good outcomes that it will not be able to do."

Dan Egan VP of Behavioral Finance & Investing, Betterment

Human accountability — both in terms of the advice being provided and the commitment to follow through on a chosen plan — is a core component of working with a planner that Egan believes will remain out of AI's reach.

"Also, if I have a connection with you, that is going to make me better able to take into account you as an individual. Not just you, but your family, your circumstances, et cetera, to more fluidly and seamlessly deliver the advice in a way that's relevant to you is going to continue to stand up," Egan said.

As ChatGPT and generative AI came back into the conversation, Portnoy played a bit of devil's advocate. He described to Egan a future in which a well enabled GPT-5 or GPT-6 tool may be able to play a smart, empathetic role in a client's life in just the same way humans advisors have for decades. 

Egan said that on a human level, he and many others are not concerned with what an AI tool "thinks" of him. For example, there is no worry of causing inconvenience if you're late for a meeting with your AI advisor, nor any fear of what may happen if its advice is completely ignored.

"The other element is that, and I think this is really tough, when we interact with people we are multichannel processes that look at how they look. What's the timbre of their voice? What mood is the person in?" Egan said. "The first thing that my personal trainer asks me when I show up each morning is like, 'hey man, how are you feeling?' How much juice do you have right now? And I think that until we can have something that kind of has that fullness or ability … we're not going to have the same immersive sense of how we should interact with it."

Egan added that to make a real connection, we have to spend time wrestling with what actually matters to us. 

"It's a conversation you struggle through with somebody else who knows how to ask questions that are relevant," Egan said. "It pushes some of the non-human work, in a good way, onto a computer and lets us spend more time having human conversations about what matters."

Portnoy said at Shaping Wealth, one of the perspectives his team keeps front and center is how much the modern advisor has evolved over the past 50 years. 

So further evolution should be expected, and embraced.

"We've gone on this long arc from transactional to relational business. It has become more of a relationship business and a more human-centric business. And I think it's increasingly understood, albeit from a small base, that the modern advisor is helping her clients move along life's journey," Portnoy said. "And there's two dimensions to that. One is as mechanic, and the other is as guide." 

He said on the mechanical side lies all of the technical dimensions to financial planning. The investments, the insurance, the estates, the taxes, the complexities. 

"All of it is more or less available in spreadsheets and legal documents. And it is akin to building an engine inside a vehicle that runs perfectly," Portnoy said. "But even if you have an engine that runs perfectly, there's a second question which is, are we driving in the right direction? And that brings on a second role of the modern advisor, which is to serve as guide. To ask the questions about goals. To ask the questions about purpose and meaning."

Artificial intelligence has regularly topped the list when advisors weigh in the kind of technologies they believe will have a major positive impact on the way they do business.

"The Future of the Data-Driven Workplace," a summer 2022 research report from Financial Planning's parent company Arizent, found that wealth managers embrace AI and machine learning at a much higher rate than do other financial services industries. A poll of 500 financial advisors in the United States and Canada conducted earlier last year by consulting firm Accenture revealed that about 83% of advisors believe AI will have a direct, measurable and consistent impact on the client-advisor relationship within the next 18 months.

That same percentage of advisors also said they believe that AI can achieve a level of sophisticated advice and planning that will ultimately leave them competing with an algorithm for clients within the next 18 months.

Earlier this year, Broadridge's 2023 Digital Transformation and Next-Gen Tech study found that 71% of C-suite executives and their direct reports across financial services say AI has significantly changed how they work.

For reprint and licensing requests for this article, click here.
Wealth management Artificial intelligence Practice and client management Fintech Technology
MORE FROM FINANCIAL PLANNING