How Advisors Can Differentiate Themselves From Generative AI Advice
While artificial intelligence tools may replace ‘limited scope’ advice, advisors must do more to stay relevant.
Applications enabled with generative artificial intelligence capabilities may soon become the leading source of retail investment advice. Deloitte forecasts usage shooting up from about 10% in 2024 to 78% by 2028.
This might seem like a scary number for financial professionals, but Deloitte notes that investors' usage of financial advisors will only drop by about 4%.
In other words, generative AI won’t replace financial advisors altogether. But it may replace “limited scope” advisors—those who only give investment or transactional advice.
That means that to stay relevant, advisors should ensure that they offer more than this limited scope and include holistic, comprehensive advice.
The term more carries a lot of weight here and may not be too helpful on its own. In our research, we defined this term by asking investors what they value in a financial advisor using different measurement strategies.
What we found is good news for advisors. It turns out that much of what investors value in a financial advisor still cannot be fully replicated by generative AI.
In the diagram below, we illustrate what this looks like.
- First, we asked clients what themes they value in an advisor. In the first column, we map out the four broad themes that we heard most frequently.
- The next column explains how gen AI, in its current state, can manage needs related to these themes.
- The final column shows how advisors can build on the outputs of gen AI, and the value they can provide by incorporating the human element of financial advising.
| Themes that investors value in an advisor | Generative AI can give clients … | A good advisor can go a step further by … |
|---|---|---|
| “Advice I can rely on” Investors are looking for an advisor who has the expertise to handle financial matters and who they can trust with their financial future and dreams. | General advice on how to handle a specific financial issue. | Giving clients advice based on their unique situation. They can also provide ongoing encouragement and reassurance, allowing investors to sleep better at night because they are at peace with their financial decisions. |
| “Helps me achieve my financial goals” Investors are looking for help throughout the whole journey to their financial goals. This includes getting help identifying goals, developing a plan, course-correcting when necessary, and, finally, accomplishing their goals. | A multistep plan on how to achieve a well-specified goal. | Helping clients uncover their financial goals, which may involve a rigorous goal-setting process. From there, an advisor can help formulate a plan that is personalized to the client, taking into consideration their time horizon, lifestyle, and financial behaviors. |
| “Keeps me on track” Investors value advisors who provide behavioral coaching, which includes providing financial education, helping them stick to their plans, and keeping them accountable. | Tips on how to stay on track amid challenges like market volatility. | Helping clients develop a plan for when market volatility hits. They can also be there to hold clients accountable when push comes to shove. Advisors can also serve as a sounding board to help clients think twice before making risky financial decisions. |
| “Maximizes my returns” Investors value advisors who achieve good returns. | General advice on how an investor can maximize their returns, such as focusing on equities while diversifying their portfolio. | Helping clients level-set their expectations regarding returns. Advisors can also help investors understand that returns are secondary to their financial goals. |
Wrapping Up
Although generative AI has immense potential in the financial advice sphere, our research indicates that investors greatly value the soft skills that a good financial advisor can bring to the table. Generative AI does a great job of spitting out answers, but it still can’t replicate the social connection inherent in good advisor-client relationships and the quality of advice that can result.
To differentiate themselves from generative AI applications, advisors should consider devoting more time to building a strong relationship with clients—and maybe even using gen AI to free up more time to spend with clients.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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