The use of artificial intelligence (AI) in financial planning isn’t new. In fact, AI has been a significant player in the financial services industry for about 10 years, beginning with the advent of robo-advisors in Canada in 2014, says Dan Richards, a professor of marketing at the University of Toronto’s Rotman School of Management.
Yet it’s only quite recently that AI has been seen as a valuable and effective tool in providing financial education, assisting with budgeting, and helping develop savings strategies.
And Canadians are utilizing it. Forty-five per cent are employing AI to learn about financial topics, 43% are using it to create or update their budgets, and 42% per cent are identifying new investment strategies via AI. As well, 40% are employing AI tools to create or update their financial plans, according to a 2024 BMO poll.
AI has been a bigger draw for younger, digitally savvy investors who may not have quite enough capital to sign up with human advisors, says Richards.
AI is popular – but it has downsides
But while AI has become an important part of investors’ toolkits, what it can’t do is get a read on how investors feel. Sixty eight per cent of Canadians polled by BMO say AI cannot understand how emotions influence financial planning.
And that’s where human advisors come in. Many are utilizing what AI has to offer: better client management tools, transcribing capabilities, rapid and accurate data analysis – while augmenting their client offerings through a holistic, personalized approach to financial planning.
They’re offering guidance – along with a human touch.
“We focus on the planning, on the estate planning, on the tax planning,” says Alaeddine Jabri, a certified financial planner and managing partner at Longevity Achieved in Mississauga, Ont.
“I don’t think anybody should be paid to pick stocks out of thin air.”
What AI offers
AI still needs refining, a reality that quickly becomes apparent when asking ChatGPT a question, Richards says. Often the answer isn’t ideal or, in some cases, correct.
Plus, there’s the issue of complexity. Robo-advisors are optimal for simple, straightforward investing decisions, using computer algorithms to design and manage investment portfolios based on an investor’s answers to a questionnaire, says Jabri. But AI isn’t optimal in situations where an investment situation is more nuanced.
While that will likely change over time, at the moment, Richards says he believes AI is best used to help investors make decisions – rather than making decisions for them.
“We know that six months from now, the state of AI is going to be better than it is today, and 12 months from now, it’s going to be better than six months from now,” he says.
Here’s what it’s best at, for now:
It’s cheaper. Using AI-driven robo-advisors is less expensive for investors because they don’t require humans. They also have lower minimum investment requirements than human advisors.
It’s good at passive investing. Robo-advisors passively invest in funds, rather than actively managing them in response to market conditions. This means fewer risks to investors but potentially lower returns.
It’s great at sifting through data. With the massive amounts of financial information out there, it can be difficult for would-be investors to wade through it. But AI can quickly and accurately synthesize that data, says Richards. “It is much better at sorting through that ocean of data that we’re all drowning in and narrowing down that information to what’s most relevant,” he says. That can in turn enhance an individual’s financial literacy.
It can provide feedback. Less directly, AI can help analyze a client call by the intonation of their voice and the phrases they use. This can help provide key feedback for a financial organization, helping enhance the customer experience. “What you have now is the capability of getting a score at the end of each call of how effective that call center rep was against a predetermined scorecard and get real-time coaching,” says Richards.
It can improve customer service. In addition to calls, AI can also help advisors deliver better customer service to their clients, says Jabri. He says his office employs it for note-taking in meetings, transcribing calls and summarizing client needs. And that has allowed him to focus more time on ensuring he has meaningful conversations with clients. “It’s made our practice more efficient – it’s allowing us to spend way more time with clients, because we hand off the burden of those administrative tasks,” he says.
What financial advisors offer
Human advisors can help investors design a robust investment portfolio that doesn’t only include the index funds and exchange-traded funds, favoured by robo-advisors. They can offer a tailored, active management approach that results in a carefully monitored portfolio.
For this, they command additional fees, such as hourly rates, a flat fee for an annual review or commissions.
Here’s what human advisors are better at:
They provide the bigger picture. Human advisors are all about the value-added at the moment, says Jabri. “We rely on the estate planning, on the tax planning,” he says. “That’s where we can do our best work.”
They offer a higher level of specialization. Advisors are increasingly moving to a model where their practices offer a higher degree of specialization in a variety of areas, says Jabri. This full-service model, not unlike a family office, offers a lot of value to clients seeking a one-stop shop for all of their financial needs.
They are more trustworthy. Investors still feel financial advisors are more trustworthy than robo-advisors, according to 2024 data from Statista. It found that 70 per cent of respondents said they had more trust in human advisors.
A middle ground?
Jabri believes the co-existence of robo and human advice will result in the best client experience.
“I think everyone can gain from the value of an advisor from a tax planning, behavioural finance standpoint – but there are some clients who understand what they want, and they’re well served having a little bit of the index,” says Jabri.
“I think the clients are better for it.”
