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For years, conventional wisdom has suggested that artificial intelligence and robo-advisers would replace a significant number of financial advisers.
But so far, that hasn’t been the case. The number of financial adviser jobs is expected to grow 17% in the next decade, much faster than the 4% average for all occupations, according to the Bureau of Labor Statistics.
“Technology never really materially displaced advisers,” Michael Kitces, the president of Kitces.com, said in a recent episode of Yahoo Finance's Decoding Retirement podcast (see video above or listen below).
Instead, it has enhanced the value advisers provide to their clients, Kitces argued. Routine, repetitive tasks that were once a significant part of the job are increasingly handled by technology, freeing up advisers to focus on other services.
“The advisory business is actually an even deeper, more enriched value proposition now than it was 20, 30, 40 years ago,” he said. “We have technology that increasingly automates much of the trading process. So we get to spend more time actually helping clients with the full breadth of their financial needs.”
Like travel agents, financial advisers lean into personalization
According to Kitces, technology continues to shape and reshape what financial advisers do, a trend similar to that experienced by travel agents.
Long ago, travel agents mostly booked flights and hotel reservations on behalf of customers. Although many travel agent jobs were lost to automation and self-service models, travel agent productivity has risen 300% since the internet disrupted the industry, Kitces said.
Today, he added, travel agents offer value-added services, helping clients book trips and experiences they couldn’t do on their own.
Similarly, in the financial advisory world, tools have been developed that enable financial advisers to streamline much of the implementation process. Twenty years ago, a retirement adviser might primarily focus on building a diversified, well-allocated portfolio, he said.
The real value now lies in delivering highly personalized advice that helps clients navigate their financial situations, Kitces said.
When life is simple, many people feel comfortable managing their finances on their own, but when financial situations arise, "suddenly financial advisers become much more relevant," he added.
Read more: What is a financial adviser, and what do they do?
Advisers help with tax-efficient strategies like Roth conversions, coordinate asset allocation across multiple accounts, create tax-smart withdrawal plans, optimize Social Security timing, and bridge health insurance gaps for early retirees until Medicare kicks in. They can also help with Medicare decisions, evaluating long-term care options, and even vetting continuing care retirement communities.
