Younger Americans think AI will help advisors improve financial planning

Younger Americans think AI will help advisors improve financial planning
But older generations are skeptical about how good technology will be.
JUN 05, 2024

Will artificial intelligence augment financial advisors’ ability to provide the best advice to clients? And will it empower more people to control of their money and use it wisely?

Sentiment among American consumers is divided, not least along generational lines, according to new research from Northwestern Mutual which asked more than 4,500 U.S. adults for their views for its Planning & Progress Study.

Younger respondents – Gen Zs and Millennials – were generally more optimistic that AI will help them reach their financial goals (57% and 55% respectively), while the older groups were less so with just 38% of Gen Xers and 23% of Boomers are positive about the potential impact of Generative AI on their financial lives.

Asked whether their thought that AI will improve the customer experience from financial services firms including with financial planning, around six in ten of younger participants said it would while only around four in ten Gen Xers and three in ten Boomers agreed.

"Younger generations are more willing to accept having their financial services partners leverage GenAI to manage their money," said Christian Mitchell, executive vice president and chief customer officer at Northwestern Mutual. "However, even older generations say they are comfortable with their financial advisor leveraging the technology to ask even better questions and help them build wealth and financial security.

Trust is always a key consideration for consumers choosing who to allow access to their finances, and this issue has been addressed this week in a Finra Foundation report which found that humans win every time.

IRREPLACEABLE HUMANS?

The Northwestern Mutual study concurs with people trusting humans (54%) far more than AI alone (15%) across most core elements of financial planning. The significant gap was similar for all tasks from creating a retirement plan to making asset allocation decisions, building and managing investment portfolios, with with humans in the 49%-59% range and AI in the teens.

However, when asked about advisors using AI tools to assist a range of tasks including prediction of future trends for decision making and providing real-time financial guidance, most people were comfortable with this.

“The majority believe AI and GenAI can be a fantastic addition for a trusted advisor, helping financial professionals deliver even better results and experiences for their clients. The bottom line is this: artificial intelligence can help organizations find human capacity, not replace it,” added Mitchell.

The ability of technology to improve financial advisors’ ability to focus on the people-centric aspects of their work, by freeing up time consuming and repetitive administrative work, will be of benefit to both advisor and client.

"So, it is people who sit at the heart of this digital transformation. The expertise and personalization that financial advisors provide can't be replicated or replaced by AI, but it can be enhanced. That's why we believe the future is human + digital, concluded Mitchell.

AI is a hot topic across financial services, not just for its consumer-facing impact but also for regulatory concerns.

The SEC’s Investor Advisory Committee is holding a virtual public meeting today (June 6) with a roundtable discussion titled ‘AI Regulation: Embracing the Future.’ It will examine the pros and cons of using AI and how the SEC will help practitioners navigate matters such as disclosures, data controls, bias, and education to ensure ethical and responsible AI practices within the existing regulatory framework and within any new guidance or rules.

Latest News

Merrill to pay $39 million in cash sweep settlement
Merrill to pay $39 million in cash sweep settlement

The financial advice industry has been facing inquiries into its cash sweep programs for years now.

SEC accuses fund advisor of defrauding SpaceX, OpenAI investors
SEC accuses fund advisor of defrauding SpaceX, OpenAI investors

Investor money allegedly went to strip clubs, exotic cars, and landscaping

RIA moves: Savant enters Thousand Oaks as Procyon lands in New Jersey
RIA moves: Savant enters Thousand Oaks as Procyon lands in New Jersey

Procyon adds $415 million in assets under management in New Jersey while Savant picks up a $213 million Southern California planning firm

Beyond sell or inherit: A third exit for appreciated property
Beyond sell or inherit: A third exit for appreciated property

With a growing number of real estate-rich Baby Boomers aging into retirement, some advisors may be failing to consider all the options available for those clients' assets.

AI marketing adoption gap costs financial firms revenue
AI marketing adoption gap costs financial firms revenue

Cornerstone Advisors study reveals compliance bottlenecks stall campaigns weeks after customer opportunities close.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains