AI vs Human Financial Advisors: Can robo advisors actually manage your wealth? Experts’ insights

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AI vs Human Financial Advisors: Artificial intelligence is no longer a buzzword; it is changing our lives for the better, from career counselling to healthcare, therapy, and even legal advice. Now, it is entering the realm of personal finance, promising to take care of your retirement savings, your child’s education fund, or even your first home purchase. But can an algorithm really understand your financial dreams and emotions? Is robo-advisory the future of investing, or are we expecting too much from machines in a world where money is a deeply personal matter?

In this article, we have decoded the information from The Money Show by ET Now, where experts from the industry, Adhil Shetty, CEO Bank Bazar and Pranjal Kamra, CEO Finology, spoke about a very relevant question: Can you trust AI with your money? And also decoded AI vs Human Financial Advisors: Can robo advisors actually manage your wealth?

Understanding robo-advisors and AI financial planners

If AI can help us in the way that a therapist would, it is no surprise that it is now entering the world of financial advising. One of the biggest problems in the world of personal finance is developing advice that is specific to individual life goals, whether it is saving for a down payment on a home, saving for a child’s education, or planning for retirement.

This has always been a time-consuming and expensive process that has required the use of human financial advisors.

AI is working to change this by providing personalised financial planning right from a smartphone, said the expert.

Can AI replace human financial advisors?

I have an old-fashioned mindset and am hesitant about relying too much on AI. It works probabilistically, trying to forecast the results based on data patterns rather than actually “thinking.” I wouldn’t trust AI completely with my personal financial matters. However, it may help financial advisors streamline research and backend work, making quality financial advice more accessible to average investors, said the expert.

Emotional intelligence plays a crucial role in finance, as understanding clients’ goals and fears is essential. Yet research shows that rule-based systems often outperform humans when emotions interfere with decision-making. Properly updated and monitored, AI can implement long-term investment strategies consistently, without the biases that emotion can introduce.

AI can help prevent errors such as panic selling, but a human advisor’s role often goes beyond managing a portfolio. Providing guidance during market volatility – through education, reassurance, and reminders about long-term goals - is critical. While AI can handle technical investment tasks effectively, offering the emotional support and counselling that investors need remains a challenge for machines.

Low-Cost AI: Accessible advice or generic guidance?

AI and robo-advisors can be highly beneficial when properly overseen.
They enable personalised, rule-based financial guidance at scale.
Proper guardrails and oversight are essential to ensure reliability.
AI improves efficiency and makes financial advice more accessible.
Some AI models over-affirm users to increase engagement, which can bias recommendations.
Transparency and regulation are critical for safe and effective use.

Can you trust AI? Understanding how it makes decisions

Existing laws are being updated to include AI, but liability stays with the institution providing the service, not the AI itself.
Focused, single-purpose AI can improve the efficiency of financial advisors.
Broad, general-purpose AI giving specific financial advice carries higher risks.
Low-cost AI services are often subsidised by venture capital; once funding ends, users may face higher costs.