A recent poll from Gallup and Edward Jones found that 18% of U.S. adults have sought financial guidance from artificial intelligence over the past year, which is resulting in clients consulting with their chatbots before meeting with financial advisors.
Dannell Stuart, president of California-based RIA Mission Wealth, says her firm meets with clients who have already asked AI tools to analyze their retirement outlook, asset allocation, or to learn about strategies like Roth conversions or exchange funds.
“Sometimes they're coming to us with a full-on financial plan that has been run through ChatGPT. It's helpful for the advisor because then we know what's on their mind, what their top priorities are,” Stuart told InvestmentNews. “We can ask them, what prompts did you use? What did you ask chat to prepare for you? It helps us in our discovery process to understand what the client really cares most about.”
Advisors still distinguish their expertise through personalizing advice for a client’s individual circumstances that chatbots do not yet match, according to Stuart. Mission Wealth clients have also had to be redirected after being misled by AI’s advice. A study from DeepVest found that general-purpose AI tools failed on 85% of investment tasks by producing incorrect calculations or hallucinating data.
“They'll ask AI if they can retire, and they'll plug in what they think the basic assumptions are, and AI will spit out a Monte Carlo probability of success that shows that they can afford to retire,” said Stuart. “But then when our advisor took that information and actually ran it through our sophisticated financial planning software, the client could not retire. They weren't going to have enough money.”
Clients have asked AI tools for advice on their stock versus bond allocation and for help in producing questions they should ask their financial advisor, says Stuart.
“Another client went to AI to ask if they should sell a particular security when the price had gone down, and our advisor was like, actually based on fundamentals of that investment and the fact that it's on sale right now, we would recommend you buy more.”
Mission Wealth, which manages $17 billion in client assets, equips its advisors and staff with an enterprise version of ChatGPT that quickly answers investment product questions on redemption periods, expense ratios, and risk metrics, as well as running analysis on client portfolios and tax scenarios. Using enterprise-grade instead of general-purpose AI tools allows for greater protection of personally identifiable information (PII).
“We use it for doing investment analyses. So when a client comes to us with a statement and they've got dozens of positions, it used to take an associate quite a bit of time to manually enter all of those so that we could run a review of the portfolio. And now we can use AI to read the statement and do that in seconds,” said Stuart.
Stuart sees both sides of how an advisor’s job can be made both easier and more difficult due to a client’s reliance on AI. “AI can make our client meetings more productive because clients have already done some of the homework. So, they arrive with the vocabulary and curiosity, and kind of a clearer sense of what they want to explore,” said Stuart, but an advisor having to be the “bearer of bad news” when telling a client that they disagree with AI’s assessment has made their job harder.
RIAs can also use AI’s involvement as an opportunity to explain their value proposition to clients, which Stuart says has been coming up during fee discussions with clients.
“The other thing that's kind of interesting is clients are using AI to benchmark fees. So what should it cost to hire an advisor for my $5 million portfolio? What services should I expect to receive from that?” said Stuart. “Our fee schedule's obviously very transparent, and it gives us an opportunity to explain our value proposition and all the things that we will be doing for them for that fee.”
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