MIT researchers have suggested that artificial intelligence (AI) has the potential to serve as a reliable financial advisor, provided it can understand emotions and build trust with users. The researchers believe that within the next two to three years, AI models can be trained to ethically tailor financial advice to individual circumstances, satisfying fiduciary duty as per regulatory guidelines set by the Securities and Exchange Commission (SEC).

Currently, the adoption of AI-powered financial advice tools has faced regulatory obstacles in the financial services industry. However, MIT researchers are confident that by incorporating empathy and small talk into AI models, trust can be developed on an emotional level. This would enable AI chatbots to act as financial advisors themselves, rather than simply providing generic advice and encouraging users to seek professional help.

The challenge lies in the fact that publicly available AI tools are “inherently sociopathic,” lacking the ability to understand a client’s state of mind and build trust. MIT researchers propose that AI models should ask users simple questions, such as “How are you doing?” before dispensing personalized financial advice. Additionally, advanced AI could analyze audio or video from users to identify emotional cues, similar to how doctors display bedside manner in the medical field.

Meanwhile, Canadian startup Conquest Planning has developed financial-planning software that utilizes an AI architecture known as a blackboard system. This system stores essential information about tax rules, cash-flow mechanics, retirement-account structures, and fiduciary rules. By inputting personal and financial data, clients can receive recommendations based on their preferences, parameters, and goals. Financial planners using this software have reported time savings and improved financial plans for clients.

While many financial advisors are eager to use generative AI as an assistant, few are ready for it to replace them entirely. MIT professor Andrew Lo believes that a future where people rely on AI advisors is within reach, but it would require retraining advisors for new careers, potentially with government support. Lo also emphasizes the need to pay attention to the speed of displacement to avoid social unrest and dislocation.