AI technology unlikely to fully replace financial advisers: Morningstar

The rise of generative artificial intelligence (AI) technologies may have a significant impact on the wealth management industry, but human financial advisor roles are unlikely to be automated away according to one major financial services firm.

While AI has the capacity to rapidly provide financial insights by researching the vast expanses of the internet and investment firms have had robo-advisors available to clients for years, that combination may not result in the elimination of financial advisor roles. A recent article by Morningstar’s Danny Noonan suggested, "AI will change the game, but it is unlikely to replace financial advisors. Rather, it will likely be an enabler, helping advisors increase productivity and deliver better advice for complex client scenarios."

Lee Davidson, the chief analytics officer at Morningstar and oversees the firm's analytics and AI initiatives, told FOX Business, "I think the way our company’s thinking about this is that most likely we’re not going to see a lot of advisor roles completely automated away, but there’s definitely going to be, I think, some mix shift in the types of responsibilities or tasks that financial advisors do and how they do them."

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"I think the world in 2030, the majority of wealth management clients are kind of expecting a data-driven, hyper-personalized advice delivery ecosystem but still with a human connection, human interface because we’re dealing with people’s livelihood – their nest eggs, their kids’ college funds," Davidson explained. "There’s going to be a role for financial advisors in that context, but some of the tasks that they’re doing today will probably be further augmented with AI."

Davidson said that the introduction of AI technologies in the financial services industry will likely make advisors more productive in the sense that they’ll have more wealth management clients per advisor with more assets to manage. 

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While AI may negate the need for some of the day-to-day interactions advisors have with clients now when chatbots serve as a means by which investors can get simple questions answered, that will allow advisors to have deeper conversations with their clients in person or over Zoom more frequently, he added.

In particular, Davidson noted that the "holistic financial planning" that financial advisors and CFAs assist their clients with are unlikely to change despite the rise of AI. He said that topics like "estate planning, tax management, wealth forecasting, multi-account portfolio optimization, and tax-deferred accounts" will be "an area humans continue to be heavily involved in, using the same types of services they do today."

As the investing public becomes more fluent in using AI tools and large language models (LLMs), it’s conceivable that there could eventually be an AI tool that serves as an end-to-end financial advisory tool. But Davidson said that’s likely to be constrained by regulation and investment recommendations will continue to be made human advisors even as they’re increasingly informed using AI tools.

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"I think for the most part, firms are going to want the advisor to still be ‘hands on the trigger,’ so to speak, when it comes to portfolio management," he said. "And a lot of that is regulatory in nature, that constraint, so even if firms felt comfortable with the technology, I think that’s going to prevent it for a while."

Ticker	Security	Last	Change	Change %
MORN	MORNINGSTAR INC	355.65	+0.91	+0.26%

This spring, Morningstar launched a beta version of its own generative AI chatbot called "Mo" across several of its platforms where it can serve as a tool for investors and advisors to conduct research. 

Mo is powered by the Morningstar Intelligence Engine, an investment research library that’s paired with Microsoft’s Azure OpenAI Service and is designed to summarize Morningstar’s independent research in a conversational format to assist investors and advisors alike. Microsoft and OpenAI are the developers of ChatGPT.

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"In our domain, we provide investment research, a lot of information for advisors or other consumers to digest and learn about securities," Davidson noted. "And even in that context, we don’t want to provide, at this juncture, a pathway for an LLM to provide that research and publish it to a client without at least some level of oversight from a qualified analyst to look at it and approve before it goes out."