AI technology is unlikely to completely replace financial advisors - Morningstar

AI technology is unlikely to completely replace financial advisors – 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 according to a major financial services firm.

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

Lee Davidson, chief analytics officer at Morningstar and oversees the firm’s analytics and AI initiatives, told FOX Business, “I think the way our company is thinking about this is that we most likely won’t see many fully automated advisor roles, but there will definitely be, I think, a mix shift in the types of responsibilities or tasks that financial advisors perform and how they perform them.”


AI is helping financial advisors research client investments and create strategies, but AI is unlikely to replace human advisors according to Morningstar. (stock/iStock)

“I think in the world in 2030, the majority of wealth management clients expect a hyper-personalised, data-driven advice delivery ecosystem, but still with a human connection, a human interface because we are dealing with people’s livelihoods: their cash, their children’s college funds,” Davidson explained. “There will be a role for financial advisors in that context, but some of the tasks they are doing today will likely be further augmented with AI.”

Davidson said the introduction of AI technologies into the financial services industry will likely make advisors more productive, meaning they will have more wealth management clients per consultant with multiple assets to manage.


Morningstar Financial Services

Morningstar launched its own AI-powered generative investment research assistant called “Mo” this spring. (Getty Images)

While AI may negate the need for some of the day-to-day interactions advisors have with clients now that chatbots serve as a means for investors to get answers to simple questions, it will allow advisors to have more in-depth conversations with their clients in person or via Zoom more frequently, he added.

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

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


AI tools can help both investors and financial advisors research potential investments and other strategies. (iStock / iStock)

“I think for the most part companies will 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 companies get comfortable with the technology, I think it’s going to prevent that for a while.”

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This spring, Morningstar launched a beta version of its AI generative chatbot called “Mo” on 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 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 ChatGPT developers.


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

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