Will AI Replace Financial Planners?

For today's episode, I took a very selfish approach to this and wondered: is AI going to replace my job specifically? That is, as an investment manager for our clients. Can somebody go to a chatbot and just ask "how should I allocate my investments?" and have a portfolio ready to go from there?

Q1: What was the experiment you ran with AI?
I wanted to see if I asked a bunch of different AI tools what an ideal portfolio would be, what were the differences and what were the similarities. I used the four main ones: Claude by Anthropic, ChatGPT, Gemini by Google, and Grok. I was kind of expecting maybe some weird responses from Grok because they have some humor and sarcasm built in there, but I was surprised that everything was pretty much the same across the board.

Q2: What situation did you give the AI tools?
I fed them this scenario: a retiree, 62 years old, with over $1 million in assets, everything in tax-deferred accounts like IRAs. I wanted to keep it as simple as possible—no tax implications, no Social Security, no distribution planning. Just a straightforward: "Give me a retirement portfolio for a moderate investor that my wife and I can live on."

Q3: What were the results? Were the recommendations any good?
The biggest surprise for me was that everything was very similar across the board. Most came back with 50% stocks/50% bonds up to 60% stocks/40% bonds—pretty middle of the road, maybe a tinge on the conservative side. But here's what really stood out: there was a definite Vanguard bias. Two of the models were all Vanguard funds. Two were mostly Vanguard with maybe an iShares mixed in. Vanguard's a great company—they were the pioneers in index investing—but I was surprised they had the lion's share of recommendations from AI tools.

Q4: Did the AI tools ask any follow-up questions about risk tolerance?
Not really. I qualified myself as a "moderate investor," which is open to interpretation. The AI let me interpret that as I saw fit. But in our world, understanding risk tolerance is a conversation. We ask things like: "What did you actually do during COVID when markets sold off over 35% in a few weeks?" If you saw that as a buying opportunity, you're getting a check mark in the higher risk category. If you sold out and went to cash, chances are you're not comfortable with a lot of risk. That's context AI can't get from a simple prompt.

Q5: So is AI going to replace human advisors anytime soon?
Long story short: the robots haven't won yet. Here's the thing—the AI tools gave textbook allocations. Broad-based indices, total stock market, international stocks. A couple even threw in a small sliver of emerging markets. It's a good starting point, similar to putting your money in a balanced allocation fund. But that's where it stops.

AI doesn't ask follow-up questions about your life. It doesn't know what tax bracket you're in, what other income sources you have, or whether you're actually implementing the plan. It gave me a portfolio, but it didn't ask me how often to rebalance, what to do during market stress, or how to coordinate this with Social Security, Medicare, or estate planning.

And here's the kicker—I recently asked AI for some quotes for my monthly newsletter. It gave me five. I asked it to verify the source on the first one, and it came back and said "actually, good question, that is an incorrect source." Then I checked another—also misattributed. Something as simple as a quote needed verification. If AI can get that wrong, do you want it handling your life savings?

One study I read found that in multi-step investment processes, AI was incorrect 85% of the time. Imagine asking for a Roth conversion strategy and getting something that blows you into the next IRMAA surcharge on Medicare. That's a big deal.

Q6: What's the bottom line?
Use AI as a thinking partner. An idea generator. It's great for going down rabbit holes and uncovering things you didn't know about. But always verify. And work with people you trust who have designations and experience. Investment management is one piece of what we do. Financial planning, tax planning, distribution planning, coordination with Social Security and Medicare—all of that is built into the process of working with a human advisor.

So no, the robots haven't won yet. Check back with us next year—we'll see if we've been replaced by some Terminator bot.