Should Clients Pay Less for Advisors Who Use Generative AI?

Why do investors pay advisors? According to our recent research, investors value advisors who provide advice they can rely on, offer goals-based planning, help them stay on track, and (to a certain extent) bring good returns.

But the world is changing, thanks to the introduction of generative artificial intelligence—and with it, so are clients’ expectations for advisors.

Although financial planning professionals do not expect to be replaced by generative AI, it still is changing the way financial planning is done as advisors incorporate it into their workflows.

Investors are not against advisors using generative AI to help with tasks like summarizing materials to create educational resources for clients. However, it’s true that generative AI means it takes less time and effort to execute these tasks—so, does this affect how much clients are willing to pay advisors for their services?

To find out, we asked investors how much they would be willing to pay an advisor at an hourly rate to perform a given activity when conducted with the assistance of generative AI versus when conducted independently.

The results were maybe not so reassuring for advisors who are looking to incorporate generative AI into their workflows. Investors reported markedly lower hourly rates for an advisor using AI compared with an advisor on their own for nearly every task.

Source: Morningstar.

These results may be jarring, but it’s true that using generative AI means advisors are doing less work themselves and potentially lowering the amount of expertise needed to complete a task. If a job takes less time and know-how, we expect it to pay less accordingly.

So, is it time to abandon ship on incorporating generative AI into financial advising?

Not necessarily—and I don’t think this means advisors should expect to take a pay cut either.

The role of a financial advisor has been changing for some time. More and more, clients are coming to see advisors as people who cater not only to their financial needs but also to their human ones. Clients value advisors who build strong, interpersonal relationships with them, help them navigate difficult decisions, and provide assurance so they can rest easy. However, these human-centric activities are time-intensive, and many advisors already struggle to make time for them.

Using generative AI as a tool to help speed up appropriate tasks recoups valuable time for advisors and allows them to provide more human-based value to their clients. In turn, advisors can “earn back” the pay they lost using generative AI by providing greater value to clients through human services with the time that they have saved.

Nonetheless, advisors should be aware that, in this shifting landscape, communication with clients is the key to ensuring they do not assume generative AI is being used to cut corners and degrade the advising experience they receive.

Because investors expect to pay less for AI-assisted work, it’s important to bring to their attention why you are using generative AI: It’s to make you more efficient with certain activities so that you have the time to create more value for them in ways only humans can. By drawing the connection for clients, you can help them understand how you are actually able to provide more value when using generative AI.

Investors were also skeptical about the amount of expertise (or lack thereof) that an advisor who used generative AI could have. However, generative AI should not be a replacement for your expertise but rather a bolster to it. Clarify to your clients what procedures you have in place for human experts (such as yourself) to review the output of generative AI to ensure the quality of its work. This will help them see that your expertise is still being deployed during AI-assisted activities, and not replaced.

Investors are also worried about the bias that could be present in the output provided by generative AI. This concern could also negatively affect a client’s willingness to pay, as they may worry about the integrity of the work co-created with generative AI. To help combat these concerns, advisors should speak about the standards they have in place to ensure that clients’ best interests are accounted for even when the AI itself does not have such a duty.

There will inevitably be growing pains associated with bringing generative AI into financial planning, but if you are clear about how generative AI allows you to create more human value for your clients, pay doesn’t have to be one of them.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.