Journal of Financial Planning: October 2023
Michael Kothakota, Ph.D., CFP®
CEO, WolfBridge Wealth
www.linkedin.com/in/michaelkothakota/
Sonya Lutter, Ph.D., CFP®, LMFT
Director, Financial Health and Wellness, Texas Tech University School of Financial Planning
Owner, ENLITE
www.linkedin.com/in/sonyalutter/
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“It sounds like maybe we should be talking about this business idea of yours, John,” said Carrie Smith, CFP®. “Retirement doesn’t seem to be on your mind today.”
John Brown is a software engineer working for a large tech company. He is well-compensated for the work he does, but has been looking for a way to retire early. This brought him to Carrie, a financial planner known for helping workers in the technology field retire early.
Today’s meeting was supposed to be about different options for retiring as well as investment strategy to achieve each option. As the conversation progressed, John was focused on stories about the woodworking he was doing. Recently, he sold a set of bar stools that were well-constructed and had highly intricate detailing.
“What business?” asked John.
“John, you are describing something that you love to do—woodworking and getting paid to do it. That’s a business,” Carrie replied. “I think we need to explore that as a transition career.”
“But you just spent a ton of time creating these scenarios. I’d really like to use the time we set aside today. I don’t want to have to wait another few weeks to discuss alternate options.”
“Scenarios were meant to change. The good news is we don’t have to wait. Our software can use artificial intelligence to help us pivot and adjust. No wait time needed. We have most of the necessary information. Let’s spend our time exploring this as an option.”
Artificial intelligence (AI) enables us to quickly gather information from clients and perspectives and guide conversations. The standard small talk of “How are you doing today?” or “How have you been spending your hot summer days?” can be used to inform productive plan changes versus being tossed aside as a “mandatory” rapport-building exercise.
The above situation is one where a financial planner is sitting with a client and the conversation takes an unexpected turn. Often, it might be difficult to pivot from one point to the next as it may take up too much time. However, the use of artificial intelligence to quickly find and synthesize information, reducing the time it takes to process and apply important information, can not only help in problem-solving for clients, but it can also help deepen the relationship.
Emotional AI (or E|AI) is a way of getting more relevant information from clients and using it in a way that helps clients create the financial wellness they desire. Qualitative analysis is time-consuming and difficult for the untrained ear. E|AI that scans text or transcripts for common themes not only saves times but also picks up on client value statements that might otherwise have been missed leading to a financial plan that is never implemented.
Simultaneously, we must be cautious of the potential dangers of relying too heavily on E|AI. Rapport is the empathetic bond that is formed between two or more people. Rapport implies you understand the clients’ why. E|AI can guide the financial planner to the why, but only a human can create a true empathetic bond.
The Good
A financial plan can now be created in a matter of minutes. Not that long ago, the ability to view multiple financial accounts from a single screen was not an option nor was the ability to view multiple applications on a span of desk monitors. As you might recall from your first engagement with dual monitors, it might have felt unnecessary and maybe even a burden. Then, it became apparent how much more efficient you could be in your work by opening a spreadsheet on one monitor while typing a report on the adjacent monitor. Tech can slow us down as we learn it, but ultimately it can make tasks much more efficient.
If a client wants to change assumptions or change some goals, with a few clicks, a new financial plan is immediately viewable. This efficiency frees time for the deeper conversations that clients want and need to have to help them meet their life goals and achieve financial wellness.
A deep sense of trust and rapport is needed before people are willing to share private details about their financial lives. Basic application of E|AI allows for alternative ways to capture client data. This is ideal for the quieter client who needs time to process before responding to questions. Digital capture also allows for helping solve the unstated problem. Because of social desirability bias, a client may at first be unwilling to fully disclose their financial goals in fact-finding meetings. Advanced E|AI can capture elements that are important themes in what clients are inputting for their background information and goals to guide more intimate human-to-human conversations. It will take time and patience to develop these advanced E|AI programs, but that time will likely pay off significantly in efficacy and effectiveness of plan implementation down the road.
The Evil
Perhaps the most concerning element of AI is that information typed into a generative artificial intelligence program is used to create new information—i.e., what you input into AI lives in AI forever. This becomes a regulatory issue pretty quickly if you are using personal client data in your AI generation. Financial planners are legally required to secure client data in ways that minimize potential for harm. Does using client information in this way violate those duties to clients? Will financial planners have to develop their own proprietary AI to meet this requirement?
Leaving relationship development to AI or other technological aids eliminates rapport. If you leave all (or even most) of client written communication up to AI, how will you remember the important details of the clients’ lives? When they ask you about what you wrote to them in a prior communication, will you remember if you, in fact, did not write the communication? Also note that despite perceptions of millennials and Gen Zers being tied to electronics, college students perceive that in-person interactions are more effective than digital experiences in managing their emotions such as those associated with anxiety, depression, and stress (McFarland and Hay 2023).
Tech Tools for Building Relationships
When using video conferencing in lieu of in-person meetings, it is necessary to increase frequency of contact, which can include video conferencing or phone calls and emails to build rapport and create a lasting relationship (Tomas and Bidet 2023). Utilizing tools that automatically record and transcribe virtual meetings (e.g., Rewatch, Loom, Otter) are great for focusing on the client and listening for what is not being said (the emotions and the process) and letting tech take care of the content.
Tomas and Bidet (2023) recommend letting clients/participants give you a virtual tour of their space or encouraging them to show you pictures of family or other important things in their lives when on video call. They found that letting the client/participant choose the video conferencing software was useful in keeping nerves low, though that might not be feasible with compliance restrictions. Clients do appear to have preferences for specific conferencing software, and allowing them to make the choice of software increases their confidence and perceived self-efficacy (Tomas and Bidet 2023), which are nice traits to increase when encouraging clients to implement their financial plan.
People tend to believe that texting is less awkward than talking via video or in person, but, in reality, they feel no less awkward after an auditory conversation, and people feel more connected after talking than texting (Kumar and Epley 2020). Hearing a voice is also more indicative of being thought of as more capable and intellectual versus reading the same information in text (Schroeder, Kardas, and Epley 2017). Interestingly, in Kumar and Epley’s (2020) research they found that audio was the key determinant of feeling connected and understood rather than audio plus video. This is good news in a world in which people are feeling burnt out by watching themselves on video (Fauville et al. 2021). Picking up the phone to explain plan changes or to check in with clients is a welcome treat for connection. If the client is showing a video on screen, you should too (though you can hide the self-view to decrease burnout), but otherwise suggesting a phone call is not a bad idea. The researchers have an ongoing study to measure Zoom fatigue if you are interested in your own level of video burnout: https://stanfordvr.com/zef/.
Client financial data cannot be purely anonymous, but ideas and generalizations about expectations can be anonymous. For instance, asking clients to report what they think Americans’ most common financial goals are, you can get an excellent sense of their frame of reference. You can then ask them to rate how much weight they think should be placed on each financial priority. This removes a bit of the directness and enables them to engage in conversation more openly as they talk about their experiences and observations that can be tied back to their own beliefs and expectations.
Technology could get us to the point of gathering biometric data for emotional indicators of well-being. Smart watches and eye-tracking software (largely within the marketing space) are already collecting and potentially using this data to guide future developments.
To Use or Not to Use
We can more efficiently and perhaps more effectively get at clients’ emotional desires with the aid of AI. Using AI to prompt clients to respond to questions about their values and goals could be a solution for increasing transparency. We are programmed, as humans, to give socially desirable responses (Paulhus 1984). With a computer, the barrier is lowered somewhat.
The catch of using E|AI is that client data might inadvertently get into the “wrong hands.” Since data is stored indefinitely to create new and better AI responses, future prompts are guided by current clients’ data. How are these data used? How can individual clients be protected? Is the benefit worth the potential costs? All these questions are important to answer as the financial services industry moves forward with adoption of AI. It may make more sense to use hypotheticals, or even create “models” that are less personal—and the personalization comes from the human aspect. Financial planners may need to learn the skills to develop their own in-house AI if they wish to fully pursue this sort of process.
This is a moment to move with the times. With all new technology, there is harm in overutilization but new efficiencies and advantages when used responsibly.
References
Fauville, Geraldine, Mufan Luo, A. C. M. Queiroz, J. N. Bailenson, and J. Hancock. 2021. “Zoom Exhaustion & Fatigue Scale.” Computers in Human Behavior Reports 4. https://doi.org/10.1016/j.chbr.2021.100119.
Kumar, Amit, and Nicholas Epley. 2020. “Research: Type Less, Talk More.” Harvard Business Review. https://hbr.org/2020/10/research-type-less-talk-more.
McFarland, Sean, and Aleena Hay. 2023. “Digital and In-Person Interpersonal Emotion Regulation: The Role of Anxiety, Depression, and Stress.” Journal of Psychopathology and Behavioral Assessment 45: 256–263.
Paulhus, Delroy L. 1984. “Two-Component Models of Socially Desirable Responding.” Journal of Personality and Social Psychology 46 (3): 598–609. https://doi.org/10.1037/0022-3514.46.3.598.
Schroeder, Juliana, Michael Kardas, and Nicholas Epley. 2017. “The Humanizing Voice: Speech Reveals, and Text Conceals, a More Thoughtful Mind in the Midst of Disagreement.” Psychological Science 28 (12): 1745–1762. https://doi.org/10.1177/0956797617713798.
Tomas, Livia, and Ophelie Bidet. 2023. “Conducting Qualitative Interviews via VOIP Technologies: Reflections on Rapport, Technology, Digital Exclusion, and Ethics.” International Journal of Social Research Methodology. https://doi.org/10.1080/13645579.2023.2183007.