What AI can—and can't—replace in financial advice
Expert Perspective
|October 29, 2025
What AI can—and can't—replace in financial advice
Artificial intelligence (AI) is transforming every corner of the financial services industry, from investment research and portfolio management to client engagement and compliance. Financial advisors aren’t immune to this wave of automation. Algorithms can already generate financial plans, rebalance portfolios, and even simulate retirement outcomes in seconds.
With the advancement of AI’s capabilities, it’s tempting to ask, “Will AI replace the human advisor?”
At Vanguard, we believe the answer to that question is no. AI does not spell the end of the human financial advisor. But there are better questions to ask, namely, How will AI change the advisor’s role? and Which advisors will thrive and which will struggle in the age of AI?
The two lenses of advisory work: Analytics and empathy
The role of the advisor is complex. You wear many hats, from confidante to retirement planner. Yet we can classify everything an advisor does into two broad categories:
- Analytics-driven tasks: Work that relies on processing data, running models, or generating reports.
- Empathy-driven tasks: Work that depends on understanding human behavior, guiding emotions, and building trust.
AI excels at the first but fails with the second.
AI can analyze vast datasets, simultaneously optimize multiple portfolios, and update financial plans in real time, all faster than a human advisor. AI eliminates many administrative and computational burdens that once consumed your day, and clients will start to expect this increased speed and efficiency in their relationship with you.
Empathy-driven tasks pick up where analysis ends. While Analytics-driven tasks calculate what the right answer is, empathy focuses on how to deliver the right answer in a way that maximizes the client’s ability to understand and act upon the analysis. For example, a human still needs to review AI-generated materials before they’re sent to the client.
Which brings up a point the industry often overlooks: AI doesn’t feel anything and thus is incapable of empathy. Yes, some large language models do a great job emulating empathy, but it’s just a facsimile of emotion. Your clients know this. So even if an AI can theoretically do a task, if that task is highly associated with emotion (fear, anxiety, hope, aspiration), your client will want to deal with you.
Below is a framework that maps the relationship between advisors and AI. Unlike most frameworks, it goes beyond identifying which tasks AI can perform by also incorporating clients’ behavioral preferences.
| Category of task | Examples | AI impact | Preferred human involvement | Perceived client value |
|---|---|---|---|---|
| Data gathering and analysis | Aggregating account data, risk profiling, cash-flow modeling, market research | High—AI can automate and scale these tasks with speed and accuracy | Low—clients are comfortable with automation | Low to Moderate—valued for accuracy, not relationship impact |
| Portfolio construction and rebalancing | Asset allocation, tax-loss harvesting, optimization algorithms | High—AI and algorithms already outperform manual approaches in efficiency | Moderate—human oversight for exceptions or complex cases | Moderate—important but largely commoditized |
| Financial planning simulations | Retirement projections, college savings models, Monte Carlo analysis | High—AI tools can dynamically personalize and update plans | Moderate—advisors validate conclusions and explain outcomes | Moderate—automation is expected; interpretation drives value |
| Behavioral coaching | Keeping clients invested during volatility, managing biases, emotional reassurance | Low—AI can’t authentically empathize or build trust | High—human empathy and credibility matter most | High—clients value emotional stability and personal interactions |
| Goal discovery and life planning | Discussing values, aspirations, and life transitions | Low—requires nuance, active listening, and trust | High—deeply personal and subjective | Very High—core differentiator for human advisors |
The advisor’s value equation: From intelligence to wisdom
AI erodes the advisor’s advantage in analytical intelligence—data gathering, number crunching, and market monitoring are now automated and scaled beyond what any human could achieve. In automating these tasks, advisors shift their value to interpretation and communication, helping clients make sense of complexity, prioritize competing goals, and stay the course.
Soon, AI will be everywhere, democratized and commoditized. In a world overflowing with data, the differentiator becomes wisdom and experience. Wise advisors who can blend AI insight with emotional intelligence (EQ) will deliver advice that’s both precise and highly personal.
Which advisors will thrive in the age of AI?
Not every advisor will adapt equally to this new landscape. The ones who define the next generation of financial advice will have three defining traits:
- An affinity for tech-enabled efficiency
Advisors who embrace rather than resist AI as a copilot will reclaim more time. Using AI automation for data, modeling, and meeting prep frees advisors to focus on strategic, high-value conversations. This includes nurturing more leads and meeting with more clients. - High EQ and empathy
As algorithms handle the math, emotional intelligence becomes the new alpha. The competitive advantage is advisors’ ability to understand a client’s fears, hopes, and motivations and to guide behavior through market cycles. AI allows human advisors to be more human. - Storytelling expertise
The best advisors won’t just deliver reports; they’ll translate AI outputs into personalized, actionable stories that connect advice to purpose. For centuries, humanity’s progress and development have relied on storytelling. This becomes even more important in the age of AI.
The future of advice: Cutting-edge AI but always human at the core
The future of financial advice will be hybrid: AI providing speed, scale, and precision with humans providing perspective and empathy. More importantly, clients won’t choose between an AI or a human advisor; they’ll expect both.
The advisors who thrive won’t compete against AI but work with it. They’ll double down on automation to free up time for strategic client interactions and to demonstrate the distinctly human qualities of empathy, wisdom, and trust.
In the AI age, the most successful advisors will be those who understand that the heart of financial advice has never been about algorithms—it’s always been about people.
Disclosures
All investing is subject to risk, including the possible loss of the money you invest.
Tax-loss harvesting involves certain risks, including, among others, the risk that the new investment could have higher costs than the original investment and could introduce portfolio tracking error into your accounts. There may also be unintended tax implications. We recommend that you carefully review the terms of the consent and consult a tax advisor before taking action.
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