Episode 15: Can Ai Replace your Financial Advisor?

Hosts: Madison Demora and Mike Garry

Episode Overview

In Episode 15 of Not Just Numbers, Mike Garry and Madison Demora dive into the intriguing topic of artificial intelligence (AI) and its potential to replace human financial advisors. The discussion centers around a recent article that outlines five essential qualities for effective financial advice and how AI compares to human advisors in areas such as empathy, accuracy, consistency, and acting in clients’ best interest. Mike and Madison explore both the promise and the limitations of AI, ultimately concluding that while AI can enhance financial advising through automation and efficiency, it is far from replacing the human touch necessary for personalized advice. They also touch upon the future of a hybrid model where AI and human advisors work together, as well as the challenges that must be overcome before AI can fully assist those who cannot afford a financial advisor.

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Timestamps

  • 00:11 – 04:09 – Introduction to episode topic: Can AI Replace your Financial Advisor?
  • 04:10 – 08:41 –AI’s Strengths and Weaknesses
  • 08:42 – 14:29 – Consistency and Hybrid Models
  • 14:30 – 18:24 – Future of AI in Financial Servies

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Episode Glossary

  • Artificial Intelligence (AI):
    AI refers to the simulation of human intelligence in machines, allowing them to perform tasks such as problem-solving, learning, and decision-making.
  • ChatGPT:
    A state-of-the-art language processing AI developed by OpenAI, which can engage in conversations, answer questions, and even assist with professional tasks like financial advising.
  • Debiasing:
    The process of reducing biases, particularly cognitive biases that might affect judgment and decision-making. In finance, this refers to helping clients recognize and reduce behavioral biases in their investments.
  • Empathy:
    The ability to understand and share the feelings of others. In financial advising, empathy is essential for understanding clients’ emotions and helping them make sound financial decisions during stressful times.
  • Accuracy:
    The degree to which AI or human advice is correct and reliable, particularly when it comes to data-driven financial guidance.
  • Best Interest Standard:
    A legal and ethical requirement for financial advisors to act in the best interest of their clients, prioritizing the clients’ goals and needs over personal gain.
  • Consistency:
    Providing uniform and reliable advice across clients with similar financial needs and preferences, ensuring fairness and dependability in recommendations.
  • Metarules:
    Guiding principles or rules set in place to direct AI’s decision-making processes, ensuring that its advice remains ethical and beneficial.
  • Hybrid Model:
    A collaborative approach that combines human advisors with AI tools, leveraging the strengths of both to provide more comprehensive and accessible financial advice.
  • Fiduciary:
    A person or organization legally and ethically obligated to act in the best interest of their clients. Financial advisors who are fiduciaries must prioritize clients’ needs over their own.
Mike Garry and Madison Demora discuss AI's role in financial advising in Not Just Numbers Episode 15.Play Video

Key Takeaways

  • AI shows surprising strengths in empathy, which is key for financial advisors during market volatility.
  • AI needs “guide rails” and human oversight for accurate and effective financial advice.
  • The future may involve a hybrid model, where AI tools assist human advisors in managing more clients.
  • Accuracy is still a challenge with AI tools, making human intervention crucial in financial planning.

 

Transcript

Table of Contents

Introduction

Madison: Hello, everyone, and welcome to the 15th episode of Not Just Numbers, Honest Conversations with a Financial Advisor and Lawyer. I am Madison Demora, and I am here with Mike Garry. Mike is the financial advisor and CFP and the founder and the CEO of Yardley Wealth Management. He is also an estate planning lawyer and his law firm is Yardley Estate Planning. Hey, Mike.

Mike: Hey, Maddie, how are you?

Madison: Good. Thank you for asking. So, Mike, are you ready to discuss the article on when you’ll be replaced by an AI tool?

Mike: Maybe someday, Maddie, but not yet. But yes, I am ready to discuss the article and the concept.

Summary of the Article

Madison: Okay, so I hear ChatGPT passed the bar exam. It might have had an easier time than you did.

Mike: It might have, but I hear I scored better. It scored like 90th percentile, I was higher than that, but I’m guessing the next version will blow my scores away.

Madison: So what do you think about the article I shared with you earlier this week?

Mike: I thought it was really good, and I liked the five criteria the author used for giving effective financial advice. You know, surprised by what AI did well and poorly. The five criteria are debiasing or, in English, helping clients know and understand what their behavioral biases are and helping to reduce them. Empathy, accuracy, best interest, and consistency.

Surprising Findings on AI Empathy

Madison: Okay, so how about I read a summary of the article so our listeners have a little better idea of what we are referring to?…

Madison: This article is titled “Can AI Replace Your Financial Advisor? Not Yet, but Wait.” The article explores whether AI is ready to replace financial advisors and assesses AI’s performance against five essential qualities for effective financial advice. Those qualities include debiasing, empathy, accuracy, best interest, and consistency…

Mike: Well, it seems to me that what AI does best is display empathy, of all things. While its accuracy wasn’t all that great, that is really crazy to me…

AI and Personalized Financial Advice

Madison: Do you believe AI can eventually replace human financial advisors in providing personalized financial guidance?

Mike: Not on its own. I agree with what the author of the article wrote, which was that AI needs guide rails or metarules…

AI During Market Volatility

Madison: So how can AI’s empathy be leveraged in providing financial advice to clients during market volatility?

Mike: Well, the author mentioned that AI can help advisors draft empathetic emails quickly during market corrections…

Challenges and Benefits of AI Integrations

Madison: What challenges and benefits do you see in integrating AI with external tools and reliable financial databases?

Mike: AI can help screen funds more efficiently, especially when paired with tools like Morningstar…

Eliminating Conflicts of Interest with AI

Madison: Can AI effectively eliminate conflicts of interest and act in the best interest of clients?

Mike: The article mentioned AI still had some conflicts, but they can be managed with proper guide rails…

AI Consistency in Financial Advice

Madison: How important is consistency in financial advice? And how can AI ensure consistent advice?

Mike: The article suggested AI could provide consistent advice, but I don’t see this as a major issue. Advisors can be consistent within their own practice…

Hybrid Model of AI and Humans in Financial Advice

Madison: What lessons can we learn from the hybrid model where smart software and doctors collaborate?

Mike: It’s a great model. Advisors could use AI for a lot of tasks, but they still need to check for errors…

AI Expanding Access to Financial Advice

Madison: Do you believe AI can expand access to financial advice, especially for those who cannot afford a human advisor?

Mike: Yes, that’s the hope. But AI needs to improve accuracy and debiasing to make this possible…

Evolving Role of Human Financial Advisors

Madison: How do you see the role of human financial advisors evolving with AI tools?

Mike: AI can help advisors be more efficient and work with more clients, but the human touch is still crucial…

Necessary Improvements for AI in Financial Advice

Madison: What additional improvements are necessary for AI to become an effective financial advisor?

Mike: The main issue is accuracy and making sure AI isn’t giving bad advice…

Closing Thoughts

Madison: Thank you, Mike, for sharing your thoughts. Any final words?

Mike: No, I think that’s it, Maddie. Thanks for bringing this article to my attention!

Madison: Absolutely. For more information on YWM, visit our website at yardleywealth.net…

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