With AI capable of picking stocks, managing portfolios, and performing tax and estate planning, advisors have reason to be concerned. At the very least, they need to brace for change.

W​​hile the headlines about AI focus on record-setting IPOs, debates over massive data centers, and guardrails to prevent the extinction of humanity, AI is already hitting the ground running in a variety of industries, wealth management among them. The money pouring into AI-related fintech start-ups coupled with the broad acceptance of AI by key financial institutions says the industry is in the midst of a full-on embrace with AI, and the wealth advisory business is already in the crosshairs. The effect on advisors may or may not include a long-term threat of obsolescence, but it will definitely include changes that are already in the making.

Rogo Technologies, a start-up that launched in 2021, has made significant inroads with its AI-based financial applications for large financial institutions such as JPMorgan Chase, Bank of America, Jefferies, Lazard, and Nomura. Its investors include even more household names, such as Wells Fargo, Citibank, Barclays, BNP Paribas, MUFG, and Société Générale. Rogo, which compares its impact to that of Bloomberg in the 1980s, integrates AI with well-established financial data sources to perform a variety of functions, including securities analysis, due diligence, presentations, research, and M&A—all with the speed and conversational elegance of an AI interface.

For the big banks and investment firms, AI is currently being positioned as a technology enhancement that can boost productivity, rather than replace existing staff. Firms will also likely view it as a way to build a competitive advantage rather than as a cost savings, particularly for ultra-high-net-worth clients, corporations, and institutions. But a logical extension for firms such as Rogo and their institutional clients with legions of wealth-management advisors will be to support that group with AI as well.

Indeed, since the company can also run portfolio analyses and provide analyses of client relationships, The Wall Street Journal already noted that “Among its next frontiers is wealth management.” In that segment of the business, increased productivity might be more likely to lead to reductions in head count, especially if fee compression occurs or a new model for retail advice using AI-assisted professionals emerges. It so happens that one already has.

AI may foster a different advice model

Range Advisory—which has offices in New York; Bellevue, Washington; and McLean, Virginia—is a licensed RIA firm designed to provide AI-assisted advice and management without charging an AUM-based fee. Range offers three levels of service for fixed fees, all of which at minimum include personalized portfolio management, access to its team of CFA- and CFP-credentialed advisors, direct indexing and tax-loss harvesting, investment and retirement planning, and access to its AI tools.

Range is not the first fixed-fee advisory service, but most of the current offerings by fixed-fee players are far less robust. The offering of a fully managed investment program from a licensed advisor—plus tax, investment, and retirement planning, as well as access to AI tools—creates a compelling proposition from a price perspective. More importantly, it establishes a beachhead for a new AI-assisted advisory model—one that is likely to become even more robust and possibly cheaper over time.

One could conceivably view a firm like Range as the next Charles Schwab—an innovator that began by introducing a new service and pricing model, only to find out later that it could bolt the former model back on top of that to realize growth from both segments.

Advisors may now have reason to question the future of the advisory role in wealth management. The new model could go nowhere. It could become the dominant model. Or, as discount brokerage did, it could succeed in identifying a new segment of the clientele that is more price conscious, less interested in a personal relationship, and more trusting of AI. That could make sense for younger, tech-oriented investors with modest wealth.

Today’s advisors may be confident that no matter how intelligent a machine is, it cannot completely replace the human factors in advisor-client relationships. They may also believe it cannot replace the hands-on planning and implementation of the many integrated services included in a truly holistic financial plan—let alone consultation and coordination with a client’s other professional advisors. Agreement on that point from regulators might remove the obsolescence threat, but while this may keep the advisor somewhere in the service loop, the nature of the service, the advisor’s role, and the fees charged may well change.

The message emanating from the widespread interest in AI among financial institutions seems to be that AI will supercharge the financial world and that, to remain competitive, AI will become as necessary to the financial business as the computer itself. That may well be true, but investments in AI will also require visible returns in some combination of additional revenue and/or lower cost, so the large firms that are adopting AI may be the canary in the coal mine for what may happen to the advisor community.

As a reminder of what technology can do to financial services, one need only call to mind the visible changes to the floor of the New York Stock Exchange, where a room once filled wall-to-wall with people is now dominated by floor-to-ceiling computer screens and a skeleton crew.

Technology deja vu

It may help to recall that the advice model as it currently exists was born out of disruption. The 1975 ruling that abolished the fixed NYSE commission schedule for brokerage customers upended the industry and laid the foundation for the fee-based advisory model that prevails today.

Discount brokerage took root almost immediately, and online trading followed later, helping bifurcate the investing populace into advisory clients and do-it-yourselfers. Some commissioned brokers saw their business shrink as a result and exited the business.

At the same time, the industry woke up to the need to expand its offerings with financial planning, added products, and more holistic financial advice.

At first blush, the online discounters were perceived as a threat to the full-service brokerage model, potentially eliminating many full-service brokerage jobs. The new firms did capture a significant share of trading activity: By the late 1990s, online brokers were handling roughly one-third of retail stock trades. But at the same time, they helped increase total trading volume by catering to self-directed investors who wanted to manage their own assets and took advantage of cheaper trading prices to increase their activity.

The do-it-yourself investors then self-selected into the discount trading world, providing a clear distinction between themselves and the longer-term investors who were not looking to trade frequently and who were instead interested in more holistic guidance and advice.

The financial industry then embraced rather than fought the trend toward separating discount services from more comprehensive services because it served the industry’s interests as much as it made sense for customers. Traditional brokerage firms began offering discounted trading-only services, and the original discount firms began offering comprehensive advice. As a result, the distinction between a traditional brokerage firm and a “discount brokerage” firm has become so blurred that almost any firm you speak with offers you the choice. Instead of one model replacing the other, a two-tiered service offering took hold, which continued to expand the overall number of licensed professionals for years afterward.

Then, as technology advanced, it had little effect on the differing needs of traders and investors. The internet and cell phones merely served the two factions in ways that related to their intrinsic needs. Traders got real-time data, charting services, 24-hour news, and trade analysis software. None of these enhancements, however, made a dent in the number of people who still sought a more comprehensive battery of services and trained professionals to deliver them.

Other potential threats to financial advisors emanated from efforts to use automated (i.e., computer-driven) investment-management tools, such as the introduction of robo-advisories, the use of automated trading algorithms, or software to do financial planning. None of these offerings put a significant dent in the number of professional advisors. Overall, the number of advisors continued to advance for most of the last several decades.

This experience, coupled with the broad preference among investors for a person-to-person relationship, the safety and accountability provided by securities laws and regulations, and the kind of emotional bond that forms between people who understand the wants, desires, and fears of other humans, will likely preserve the human interface in investment advice for years to come. The growing trend of financial guidance rooted in behavioral finance principles has only served to reinforce the value of one-on-one advisory relationships.

That said, it has clearly been demonstrated that some clients are highly price sensitive and that others simply prefer to manage their own money. So, while there is little evidence thus far that the market for personal financial advice will evaporate as a result of AI technology, we do know that it is already facilitating changes to the nature of investment advice, the role of the personal advisor, and the cost of the service.

As such, it will be important for advisors to remain vigilant about maintaining their relationships, keep up with the availability of alternative service offerings, and consider using the newest technologies as an enhancement to their own business to remain competitive. It may well be that clients expect to continue their current advisory relationships but that they (especially younger clients) also expect their advisors to take advantage of all available technology.

What does AI have to say?

The temptation to pose the question directly to an AI agent about replacing financial advisors was too strong for me to resist. So, I asked Copilot if I could trust it to provide sound, legal investment advice and whether it could replace a human advisor. Here is its response:

It then added the following points:

It followed with this warning:

All in all, it seemed to me that AI had a pretty good sense of itself in this regard. If you are an advisor, perhaps you can rest a little easier now.

Copilot’s comments notwithstanding, advisors should expect that AI will significantly impact the practice of wealth management and embrace—rather than oppose—it.

A managing partner at a leading RIA firm summed it up well in an interview with Proactive Advisor Magazine: ​

The opinions expressed in this article are those of the author and the sources cited and do not necessarily represent the views of Proactive Advisor Magazine. This material is presented for educational purposes only.