Robots Watching, AGI Rising: How Will Financial Advisors Be Impacted?

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There were two huge developments in AI this week of interest to financial advisors.

?First, in a remarkable breakthrough, Johns Hopkins and Stanford researchers enabled robots to learn surgical procedures by watching video footage of expert surgeons.

?Utilizing imitation learning, these robots can replicate complex tasks like suturing and tissue manipulation with a precision that rivals human surgeons.?

?Second, in a recent interview, Dario Amodel, the CEO of Anthropic (which developed Claude), predicted artificial general intelligence (AGI) would arrive by 2026-2027 and possibly sooner.?

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How do these developments impact financial advisors??

Surgical robots and financial advisors

Surgery and financial advising may seem worlds apart. However, both fields require expertise, decision-making under uncertain conditions, and personalized client interaction.?

?The critical technological advancement here is imitation learning—a form of machine learning where robots or AI systems learn to perform tasks by observing experts.?

?Just as robots learn intricate surgical procedures, AI could learn complex financial planning and investment strategies by analyzing the actions of seasoned advisors.?

It’s not much of a leap to assume AI can be trained to mimic the decision-making processes involved in asset allocation, risk assessment, and market analysis.?

Potential disruption?

?Here’s how this advancement in AI could impact your business model:?

?·????? Tasks like portfolio rebalancing, performance reporting, and essential investment advice could be fully automated.

·????? AI could handle complex data analysis more efficiently than humans, identifying trends and opportunities that might be overlooked.

?·????? Automated services can operate at a fraction of the cost, enabling firms to offer lower fees. However, this would also reduce revenues and perhaps profits.?

?·????? As AI services become more prevalent, clients may expect more for less, pressuring traditional advisors to adjust their fee structures.?

?·????? AI advisors can manage unlimited clients simultaneously, making financial advice more accessible.?

?·????? Clients could access financial advice anytime, enhancing convenience and satisfaction.?

?·????? AI can process vast client data to provide highly personalized financial plans.?

?·????? AI could tailor advice to individual behaviors and preferences by observing client interactions.?

The dawn of AGI: what it means for financial advisors?

Artificial General Intelligence (AGI) represents the next frontier in artificial intelligence. Unlike current AI, which excels in specific tasks like portfolio optimization or language processing, AGI refers to an AI system capable of performing any intellectual task a human can do. AGI embodies adaptability, creativity, and problem-solving across diverse domains—qualities that mimic human intelligence.?

AGI can understand and learn from experiences, apply knowledge to unfamiliar scenarios, and think abstractly. Essentially, AGI wouldn't just assist humans in tasks—it could potentially replace them in many intellectual pursuits.?

If Amodel’s prediction holds, the implications for every industry, including financial advisory, are profound.

AGI could replicate or even surpass advisors' ability to provide financial planning, risk assessment, and personalized investment advice.

What’s left??

If AGI can do everything a human financial advisor can, what remains for you to contribute??

Here’s what you might focus on to remain relevant:?

?·????? AGI may mimic human empathy to an extent but would lack the experience and emotional depth humans bring.

?·????? Financial planning often involves making decisions based on incomplete or ambiguous information. Advisors who apply their judgment and intuition could excel.

?·????? Advisors can differentiate themselves by aligning advice with clients’ values, such as ethical investing or philanthropy.

?·????? Advisors often mediate family dynamics in estate planning or wealth management—skills AGI cannot replicate.?

?·????? Clients may seek reassurance and validation from human advisors when implementing significant financial decisions.?

A thin reed

You may be taking unjustified comfort in the belief that AI can’t replace your empathy skills.?

AI has made significant strides in recent years, particularly in areas that enhance its ability to offer empathy and understanding and even earn users' trust. Advances in natural language processing and emotion recognition allow AI to detect and respond to emotional cues, creating a personalized and supportive experience.?

Genuine empathy, trust, and understanding require human experience and emotional depth, which AI cannot fully replicate—yet.?

Opportunities

Despite the potential disruption, there are still ways you can adapt:?

·????? Use AI for data analysis, portfolio optimization, and market research to enhance the quality of advice.

?·????? Automate administrative tasks to focus more on client relationships and strategic planning.

·????? Tackle complex financial situations that require nuanced judgment and experience.

·????? Develop expertise in areas like estate planning, tax strategies, or serving specific industries.?

?·????? Provide comprehensive services considering clients' life goals, values, and circumstances.

?·????? Strengthen relationships through regular, meaningful communication.?

What does the future hold??

?The most likely scenario is a hybrid model in which AI handles data-intensive tasks while human advisors focus on strategy and client relations.?

?AI would manage technical aspects like portfolio construction, compliance, and market analysis, while advisors focus on the uniquely human elements of their role.?

?A curve ball

?What if major financial institutions like Fidelity, Charles Schwab, or Vanguard fully embrace AI and offer retail clients low-cost, AI-driven financial advisory services??

This isn't a stretch. These entities currently market advisory services to retail clients.? An AI-enhanced service would be a logical next step.

?Here’s what might happen if this occurs, depending on the sophistication of the new service:?

?·????? Standard financial planning and investment management might become commoditized, with clients expecting lower fees.

·????? Younger generations and tech-savvy clients may prefer AI-driven services for convenience, speed, and lower costs.

?·????? Clients may expect faster service delivery and immediate responses, challenging advisors to meet these demands.

?·????? Smaller advisory firms might merge or be acquired to pool resources and compete with AI-driven services.?

·????? You might lose a meaningful portion of your client base to what is perceived to be a more efficient, more cost-effective service provided by a more prominent brand.

?Final thoughts?

The advancement of robot learning by observing experts is a testament to the rapid progression of AI technology. The prediction of AGI by 2026-2027 raises profound questions for the financial advisory profession.?

The only certainty for financial advisors is that massive change is coming. Whether you adapt or fade into obsolescence will depend on your ability to embrace technology while amplifying the uniquely human aspects of your role.

Dan Solin is the President of Evidence Based Advisor Marketing (“EBAM”), a digital marketing agency serving financial advisors.? EBAM’s services include coaching (using the proprietary “Solin Process”) to convert more prospects into clients, website design, video production, content marketing,? cutting-edge SEO campaigns to create a steady flow of qualified leads, and using AI in marketing. He is the New York Times bestselling author of the Smartest series of investing books. ??