Arrow Icon
blog header pale blue image blog header abstract shape

Heart of Advice

Insights and best practices for successful financial planning engagement

left arrow Back to All Articles

The Role of Artificial Intelligence in Financial Planning

Nick DiLisi November 1, 2023

Person looking at AI-enabled planning platform

Artificial intelligence (AI) has garnered outsized attention as of late with the launch of ChatGPT and other generative AI platforms. It’s led many in the financial planning industry to ask how AI will impact financial advice.

While there are many misconceptions, the truth is there are a variety of ways AI technologies will impact advisors. There are also ways that machine learning (ML)—a subset of AI—has been quietly supporting financial planners for years.

To understand AI in financial planning, it’s important to look at its applications today and in the future, as well as the ethical considerations of adopting this kind of technology.

The Role of AI and ML in Planning Today

In financial planning technology, ML is everywhere, and you’re probably using it regularly without even realizing it.

For example, the eMoney platform uses machine learning technology for enhanced transaction categorization. This is a feature that recently launched, and while users—for the most part—won’t see a huge difference, it enables the addition of new transaction categories. Identifying and categorizing transactions has been notoriously difficult in financial services, and machine learning technology proved to be the best way to overcome this difficulty.

Even concepts as simple as fuzzy pattern matching are a type of machine learning. An example of this would be when you’re typing in the name of a financial institution in order to connect accounts and you misspell the name but the platform still finds the correct institution.

None of this is to say that AI is radically transforming financial planning today. They are just two examples of how ML can be applied in simple, practical ways to improve planning experiences.

The Future of AI and Financial Planning

A common argument against AI in general is that it will replace professionals by automating the work they do. However, we know how necessary the human element is for a successful and personalized planning experience.

AI technologies like ML will never replace advisors or do planning for them. Still, they will make financial planning software an even more intelligent partner for advisors of any level of expertise by enhancing planning efficiency and expanding planning knowledge.

For less experienced advisors, ML planning technology will lower the barrier to entry by shouldering the burden of understanding advanced planning techniques. It won’t turn anyone into a financial planning expert, but advisors with basic planning knowledge can one day use ML capabilities to create more complex and reliable financial plans efficiently.

For more experienced advisors, ML technology can also help broaden their expertise. For instance, if you specialize in tax planning but want to expand your services to clients looking for estate planning, your software will be able to help you understand the nuances of specialized planning techniques you may be less familiar with.

Taking a Responsible Approach to AI

As the financial industry continues to embrace AI and evolve its planning tools, financial advisors are taking steps to use these technologies responsibly while protecting their clients’ interests.

Here are some of the most pressing ethical considerations when it comes to AI, for both technology providers and users.

Data Privacy, Security, and Compliance

You understand the importance of safeguarding client data. By using technology that employs robust cybersecurity measures—including encryption, multi-factor authentication, and secure cloud storage—you can protect your clients’ sensitive information from unauthorized access. It’s just as important to ensure the company you’re working with does not own or use your data for purposes other than the stated business purpose. There are companies out there who will sell data or use it in other ways, so be sure to ask your vendors about their data privacy stance.

Third-party Vetting

Before implementing a new planning tool, be sure to evaluate it for ethical considerations. Choose AI platforms that prioritize fairness, transparency, and accountability. This includes avoiding AI systems that might introduce bias or discrimination into their decision-making processes.

Data Consent and Transparency

Before entering your clients’ data and private information into your planning technology, seek explicit consent from your clients to use their data in AI-driven processes. Maintain transparency by explaining how AI is used and its potential impact on financial planning decisions.

Robust Risk Management

Acknowledge the risks associated with AI, develop comprehensive risk management strategies, and plan for contingencies in case AI systems fail or produce unexpected results.

By safeguarding client data, adhering to ethical AI development principles, and prioritizing transparency and risk management, both technology providers and users will reap the full benefits of AI technology as it starts to impact financial planning.

DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.

Image of Nick DiLisi
About the Author

As Head of Technology, Nick oversees software development and IT operations for the company. As one of the pioneering employees who co-founded eMoney in 2000, he also served as Chief Information Officer. You can say Nick’s contributions to eMoney’s core products give them the “X” factor not found in other financial platforms.

You may also be interested in...

Diverse Team in Data Strategy Session

Prepare Now for AI Use in Financial Planning

With the introduction of such generative artificial intelligence (AI) tools as ChatGPT, Gemini (previously Bard), and others, speculation about future… Read More

empowered client shopping with mobile client portal

Empowering Financial Wellness: How Client Portals Reduce Financial Anxiety and Transform Client Relationships

Feelings of financial insecurity have surged to an all-time high among Americans, with one-third (33 percent) reporting that they do… Read More

Financial advisor business leader talking to team about growing business

3 Steps to Growing Your Financial Advisor Business

From established Baby Boomers to younger generations just beginning to explore investment options, everyone needs financial planning assistance. ​​In fact,… Read More

eBook: The New Advisor Value Proposition

Download our latest eBook and learn how top advisors are combining Fintech and FinPsych for superior client outcomes.

Download Now

Sign up to have the most popular Heart of Advice posts delivered to your inbox monthly.

Heart of Advice by eMoney Advisors

Welcome to
Heart of Advice

a new source of expert insights for
financial professionals.

Get Started

Tips specific to the eMoney platform can be found in
the eMoney
application, under Help, eMoney Advisor Blog.