AI Wants Financial Advisors’ Jobs. Do They Stand a Chance?

ChatGPT and its AI siblings are all the rage today – and besides excitement, they are causing unprecedented fear among workers in a wide swath of industries, with predictions that these advanced technologies will replace them. While there aren't yet any documented cases of workers being fired and replaced by ChatGPT, the World Economic Forum predicts that advanced AI could potentially replace as many as 85 million jobs worldwide by 2025.

ChatGPT is just the beginning. After some hiccups, Microsoft has again opened up its more advanced Bing chatbot to extensive public testing. And just beyond smart chatbots are new advances which will enable AI systems to develop flexible and constantly-updated data models in response to new events and developments, essentially giving these systems the ability to “predict” the future, based on analysis of millions of scenarios in which similar events took place in the past.

AI is Making Powerful and Smart Changes in the Way We Work

With such “powers,” it appears that AI will be coming for many of the white-collar jobs that, until now, were considered secure. Jobs in education, journalism, marketing, advertising, and many other professions are considered at risk – as are jobs in finance. With the right data, AI systems will be able to develop accurate financial and economic forecasts and apply them to specific circumstances of clients, obviating the need for advisors, bankers, or any other professional.If AI can accurately predict changes in markets and dispense accurate advice to investors, then who needs financial planners?

But don't write off those jobs – or the need for those human professionals – just yet. With all its capabilities, AI still needs to be “supervised” – with a human who understands an investor's goals, situation, and limitations into perspective. And people would still rather deal with a fellow person where possible. AI won't replace the professionals doing that work; as in many other areas, the future won't be the replacement of humans by advanced technologies – but rather a partnership.

AI is Actually Creating New Jobs

That line about jobs losses in the WEF report made headlines, but less reported was another important statistic, which said that AI will actually create 97 million jobs – a net gain of 12 million jobs. As automation has already changed the labor market – with machines and robots doing the repetitive “drone work” that had previously been done by humans – advanced automation coupled with AI, will replace the rote writing, data processing, accounting, and other work that is based on research, collation, and presentation of data and information. The jobs that will be created will entail development and supervision of data models, ensuring that they make sense and address the required needs.

And while future advanced AI will have even greater capabilities because of its ability to alter predictive models on the fly, it will require that much more supervision of those models to ensure that they do not violate laws, regulations, or ethics. The technology used by AI-powered self-driving Teslas, for example, was involved in a series of recent crashes – that led to a massive recall of vehicles – makes it clear that AI needs to be supervised. And, it stands to reason, the greater the capabilities of the AI, the greater the need for supervision.

Will Humans and AI Work Together in Finance?

In the financial realm, this supervision could entail a human evaluation of a client's financial situation before applying AI-generated advice. If, for example, the AI predicts that a stock has an 80% chance of rising by 10% within the next month, a financial planner might recommend that investment to a client with enough savings to cover a loss in case the 20% chance that the stock won't rise comes to fruition – but they might not recommend that investment to someone would find themselves in financial straits if the investment didn't pay off.

Similarly, a loan officer whose AI analysis said that a loan applicant was a good risk based on their assets would want to analyze that recommendation based on the applicant's assets. The decision on the size or conditions of the loan could vary based on whether those assets were based on very secure vehicles like bonds or T-bills, or more speculative assets like cryptocurrencies. The loan agreement might include a condition that in order to qualify, the applicant will have to keep their assets in those more secure vehicles.

Besides vetting AI-generated information, humans will continue to play an important role in finance – just because they are human, providing an important “human touch” to transactions. That's especially important in financial matters – where individuals trust financial organizations, financial planners, investment houses, and other institutions and advisors with their life savings, major financial assets, inheritances, and much more. While data scientists are developing algorithms that understand context, developing algorithms with a full understanding of human motivation remains a much greater challenge – and even if (or when) such systems are developed, it’s likely that people will still prefer to have those recommendations vetted by a human.

Investors will continue to rely on human insight but AI will open new financial horizons

As good as AI is – or will be – investors, savers, borrowers, mortgage holders, and anyone else who trusts their money to someone else wants that someone to be a “someone” – not a soulless entity. AI is indeed coming, and in many ways is already changing the way we work, live, and invest. But like with previous industrial and technological revolutions, it turned out that, far from causing mass unemployment, these advances created many new jobs.

Finance professionals need to embrace AI to remain relevant

Data model supervision and human customer-facing needs are just two ways workers in the financial industry will “survive” in the era of advanced AI – and it's likely that they will not just survive, but thrive, as the “partnership” between humans and AI opens up new opportunities.