Artificial Intelligence and Financial Planning

Artificial Intelligence has been around for decades, but it is now demanding more and more of our attention. Without question, this technology holds tremendous promise for our ability to create more and more sophisticated computer programs; indeed, this potential is driving much of the current pricing activity in the financial markets, with companies such as chipmaker NVIDIA, Meta, Inc. (formerly Facebook),, and others receiving increasingly high valuations because of their investment in and use of AI technology.

On the other hand, much has been written about the “existential risk” to humanity that AI poses (think original Terminator movie): its potential to replace many existing jobs and even the possibility that the technology could usurp its creators (think Matrix). On the more positive side, AI also has the potential to aid researchers in finding cures for previously untreatable medical conditions, powering better solutions in customer service and computing, and making possible many other advances that could benefit from its advanced analytical capabilities.

But there is one thing for certain: for all its tremendous potential, AI cannot accurately predict the future.

Certainly, AI is changing the landscape of financial planning and advice, providing more powerful engines to crunch historical data to try and make some predictions about the future.  It is quite interesting to think that computers today can assemble all the known trading data of the stock market and analyze it in a second to provide some “educated guesses” about stock prices and returns. Not only that, but algorithms can be written to express the risk of external events such as earthquakes, droughts, wars, etc. The power of AI in the financial services world continues to evolve in many areas of planning.

But when we return to the basics, the question we always hear is the universal one:  “Am I saving at a high enough rate to make sure I have enough to retire on?”  Financial planning requires an array of assumptions to determine if someone is saving enough for retirement.  Some of these can be controlled, but most are not.  Factors needed to evaluate if a client is on target include inflation, investment rate of return, income increasing over time, and expenses moving up and down during one’s lifetime.

The question is: “What is enough”?  “Enough” is presented in the context of what you will spend during your lifetime and in retirement.  When will you start?  When will it end?  Will you spend like a miser, like a sailor on shore leave, or somewhere in between?  The answer to the question is an easy one when looking in the rear-view mirror, but you really will not know until you get to the end.  And as the boxer Mike Tyson once said: “Everyone has a plan until you get punched in the face.”

The existential question that AI cannot answer, nor can we, is: “When are you going to miss the breakfast bell”?  When will a life event arise, such as a sudden illness or an unexpected death?  We have actuarial tables that tell us approximately when we should die, but no one can be sure.  So many unknown and uncontrollable variables and unforeseen circumstances exist that, even if you were to ask Chat GPT, “When will I die?” it will give you the following answer: “I can’t predict individual lifespans or provide medical advice.  It’s important to focus on living a healthy lifestyle and seeking professional medical guidance for any concerns about your health or mortality.”

AI will improve a great many things in our lives. It will, undoubtedly, be able to increase our life span by helping us lead healthier lives.  That is a good thing.  It will help us analyze financial data used in planning to adjust portfolio allocations to optimal levels given certain inputs by our clients and to run millions of “what if” scenarios to help us make better decisions.  Regardless of its power, however, it cannot answer the existential questions about the future.  Therefore, in the absence of future knowledge, we can assume certain variables that help increase our chances of leaving this earth with money still in the bank.  Those variables are time-tested:  Start saving early; control the things you can control in your investment portfolio (expenses, amount you save, risks taken, and the amount of time you must invest); and spend within your means.

Even if you asked Chat GPT about the basics of saving for the future, the answer would be similar to what we have outlined.  And why should it be any different?  All Chat GPT and AI are doing is assembling human knowledge and trying to apply it to questions it is asked. It can spit out the answer quicker than we humans but cannot replace the human element.

Your financial advisor has something AI will never have: empathy.  This is the ability to sense other people’s emotions, coupled with the ability to imagine what someone else might be thinking or feeling. And that is the reason why AI will not replace your financial advisor anytime soon, but rather enhance the information and advice used to collectively make planning decisions.

JFS Wealth Advisors is a fiduciary financial advisor and wealth manager. We utilize technology to help us guide our clients in making decisions and developing financial strategies that can allow them to achieve their most important financial goals. To learn more, visit our website to read our article, “10 Years from Retirement? What to Do Now.”

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