Key Takeaways
There are some great uses of AI in our profession, but it should be used to supplement (not replace) expert human advice.
Advisors should know each of their clients’ “money personality” type and tailor advice accordingly.
You have the right to ask your advisor how many clients they are serving. If the number is in the hundreds or thousands, they probably can’t get to know you well.
When we established Novi Wealth, we knew that technology would be a critical part of our business. We knew our “tech stack” would be very important for delivering consistent, high quality outcomes for our clients, giving them the highest probability of meeting their financial goals.
Some of the great technology tools we use make it possible to:
Scan tax returns to enter data instantaneously.
Manage and update thousands of portfolios accurately.
Create probabilities of success for different retirement scenarios. Thus, clients know much they can afford to spend post-work and how long their money will likely last.
Crunch massive amounts of data to provide higher levels of certainty.
Communicate, collaborate, and meet remotely from anywhere.
What technology cannot do is replace the human element of our business. It cannot tailor the advice we provide to each client taking or take into account each client’s comfort with money matters – or lack thereof. Technology cannot analyze the output of our recommendations and make them relatable to each client based on their personality type, their interest in finance or their life stage.
There are some excellent uses of artificial intelligence (AI) in our profession. It’ll get to those in a minute. But when it comes to a client’s financial and life plan, there are way too many variables at play to rely exclusively on a robo advisor or chat bot.
But don’t take my word for it. Separate studies by Russell Investments and by Vanguard showed that human advisor added between 1.5% and 2.37%, respectively to a client’s annual return when compared to machine-based advisors. The big reason for that outperformance is that human advisors can help control an investor’s behavior.
If you’re managing your own investments and financial plan and think you can do so just by leveraging technology, you may be missing the boat on some things. Having someone to meet with, to lean on, and to have those important critical “it depends” conversations is the best way to know your objective so you can maximize your probability of success.
That being said, AI can help with rebalancing, trading functions and potentially tax planning and management – things that are simply measurable and transactional. These tasks have nothing to do with emotion or keeping impulsive human behavior in check during times of volatility or heightened stress.
I bring this up because a new AI offering called ChatGPT is getting lots of attention these days because of how well it seemingly replicates human communication. This tool will open doors to more automation and potentially make the human race a little less creative and mentally numb. There are so many things to consider how it will impact industry, but I believe it will never truly replace human interaction.
Our firm’s research, tools and client interactions show that people have many different “personality” types including: Thinkers, Persisters, Harmonizers, Imaginers, Rebels, and Promoters, to name a few. We’ll talk more about these personality types in a future post. Just know that our advisors are highly cognizant of each client’s personality type, so we tailor our advice carefully for each. Taking the wrong approach with the wrong personality type can have disastrous results.
With an advisor-to-client ratio of just 40:1, we really get to know our clients, their families and their values. That’s much harder to do at a large financial institution where the advisor-to-client ratio is more often 250:1 or even 500:1. It’s harder still for a machine to do.
If you feel you have way too much money sitting in cash, but aren’t sure where to deploy it, you might want to consider working with a (human) advisor who has the capacity and desire to know intricate details about you. Knowing those details can make a significant difference in your planning approach and outcomes. Likewise, if you have highly appreciated long-held assets, but are worried about the tax implications of selling. Or maybe you took some losses last year and aren’t sure how to harvest them.
Our firm’s purpose statement is "Empower all to find their definition of wealth while providing the confidence to achieve it." The first part: “Empower all” could benefit from a tool like ChatGPT. However, I am afraid in the wrong hands, it could cause more harm than good. The human should still be the basis for evaluation and judgement.
Conclusion
Our clients know that we place a premium on personalized attention. It’s about really getting to know you and your family and what’s most important to you. Again, we keep our client-to-advisor ratio under 40:1. If you or someone close to you has concerns about your cash flow or retirement planning, contact us any time to discuss. We’re happy to help.
ROBERT B. DUNN, CFP® is the President and Managing Partner of Novi Wealth