Katlyn Orton
RICP®, Series 6, Series 63, SIE
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How Financial Advisors Can Effectively Leverage AI Tools in Practice
According to surveys from the World Economic Forum and the Cambridge Centre for Alternative Finance, as of late 2023 85% of financial organizations globally were using AI tools in some form, and 52% have already created at least some AI-driven products and services. Additionally, 77% of firms believe generative AI platforms such as ChatGPT, Bard, and Microsoft Copilot will become essential to the industry in the next two years.
While lawmakers, technologists, philosophers, and everyone in between may continue to debate the ramifications of developing AI and potential guardrails that should be placed on new innovations, it’s clear these platforms are not going anywhere and have already become indispensable to many businesses for one simple reason: efficiency. ChatGPT, for example, can scour the entirety of the internet and return comprehensive, conversational answers to queries in a matter of seconds, dramatically faster than a human being could reach the same conclusion. And as one of the industries most directly impacting everyday people and their livelihoods, the financial services profession has found itself at the heart of this technological revolution.
This examination of how financial professionals can use AI effectively and responsibly was the subject of a recent webcast from The American College of Financial Services, held exclusively on its subscription-based learning platform Knowledge Hub+. Eric Ludwig, PhD, CFP®, director of The College’s Retirement Income Certified Professional® (RICP®) Program, and Chet Bennetts, CFP®, ChFC®, CLU®, RICP®, CLF®, director of the Chartered Financial Consultant® (ChFC®) and CFP® Certification Education Programs, hosted the discussion based on their deep experience with testing and using AI systems: specifically, the evolving field of prompt engineering.
“Almost everyone who uses ChatGPT for the first time is blown away–but not always for the right reasons,” Ludwig says. “Its job is to respond and give you answers, but in doing so it’s not immune to ‘hallucinating’ or making up information. The question we’re trying to address is how to get the tool to do what you want it to do, and the answer is making clearer requests.”
"The question we’re trying to address is how to get [AI] to do what you want it to do, and the answer is making clearer requests.”
- Eric Ludwig, PhD, CFP®
Uses of AI in Financial Services
As Ludwig and Bennetts point out, even before the launch of ChatGPT, almost everyone was using AI in their lives in some form or another, whether it be through voice assistants like Siri or recommendations in your Netflix queue. The differences between these algorithm-driven services and something like ChatGPT are functionality, level of interactivity, and real-time updates—something that substantially changes the game.
“Consider this: when Netflix and Facebook were first introduced to the world, it took nearly 10 years for them to become universally adopted and accepted,” Ludwig says. “With ChatGPT, it took only two months. Financial professionals can’t afford to overlook these technologies.”
So, should your financial services practice start using AI in everyday work? Ludwig and Bennetts say the answer largely depends on the kind of work advisors want AI to do for them. As Bennetts explains it, there are three big questions every financial professional looking to leverage AI tools should ask themselves:
- Does it matter if the AI tool’s output is true to your practice?
- Do you or other advisors have the expertise to verify what the AI tool is telling you?
- Are you or your organization willing to take responsibility for inaccuracies that may occur based on AI-generated knowledge?
Depending on the answers to these questions, Bennetts suggests financial professionals think long and hard about how they can use AI to its maximum potential and with minimal risk to themselves and their reputations.
“Time savings from using AI tools depends on what you’re using them for,” he says. “Obviously ChatGPT isn’t going to be able to run a meeting with a client for you. But it can be great for service-level jobs, preparation for client meetings, and portfolio- or proposal-building.”
“Obviously ChatGPT isn’t going to be able to run a meeting with a client for you. But it can be great for service-level jobs, preparation for client meetings, and portfolio- or proposal-building.”
- Chet Bennetts, CFP®, ChFC®, CLU®, RICP®, CLF®
How Advisors Can Use AI Responsibly
While ChatGPT and other AI tools are powerful, Ludwig and Bennetts stress they are not infallible: ChatGPT is notoriously bad at translating written descriptions into visual images, for example, and at times even basic math appears to be difficult for it. For this reason, the thought leaders strongly advise against taking the information AI provides as gospel—at least, not without checking it first.
Bennetts says he recommends financial professionals use AI tools as a starting point for research or drafting, reviewing its output and saving the most salient points for personalization and fact-checking before use. Because of this, he says he’s skeptical AI will ever fully replace human workers.
“We generally find consumers still get their financial advice more from social media than from AI,” he says. “The medical community probably felt the same way when WebMD was first created, but WebMD didn’t stop people from going to their doctor. It’s a supplement, not a substitution.”
"[AI] is a supplement [to professional guidance], not a substitution.”
- Chet Bennetts, CFP®, ChFC®, CLU®, RICP®, CLF®
Ludwig and Bennetts also say advisors using ChatGPT and similar systems shouldn’t be afraid to get specific about what they want and how they want it when using AI: advisors can use the technology to provide output to a multitude of formats, specifications, and voices—as long as they know how to ask the right questions and keep their intended audience in mind.
Want to learn more? You can watch Bennetts and Ludwig’s full conversation, including a live demonstration of how financial professionals can use ChatGPT, as well as their AI 101 course, on Knowledge Hub+, now available exclusively to members of The College’s Professional Recertification Program–and coming soon as an open subscription model!
More From The College:
Get specialized retirement planning knowledge with our RICP® Program.
Get the details of our ChFC® Program.
See our CFP® Certification Education Program.
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Study Finds That Improving Financial Literacy Supports Retirement Wellness and Confidence
KING OF PRUSSIA, PA – February 14, 2024 – The American College of Financial Services 2023 Retirement Income Literacy Study finds that older Americans lack actionable retirement knowledge—averaging 31% on a retirement literacy quiz. The study reinforces the direct relationships that exist between financial literacy and factors such as asset level, as respondents with more than $1.5 million score twice as high as those with less than $100,000 (50% vs. 25%). The study also reveals the essential role financial professionals play in educating clients, as advised respondents have higher retirement income literacy and better outcomes than their peers.
The study comes at a time when more Americans need to ensure they will have enough money to last throughout their lifetimes. The much-discussed Baby Boomer wave will crest in 2024, with 12,000 retiring every day. With the “Graying of America” and the median age of Americans going up, it is more important than ever to plan for longer, well-lived lives, considering long-term care needs and replacing more of their pre-retirement income.
"In the U.S., with the exception of Social Security and the comparatively small number of workers with guaranteed pensions, saving for retirement is voluntary. This requires the consumer to know how much to save, where to save it, and how much to drawdown at retirement," says Steve Parrish, JD, RICP®, CLU®, CHFC®, AEP®, Professor of Practice at The American College of Financial Services. "This necessitates understanding basic concepts about investing, taxes, insurance, and finances. To measure how prepared Americans are for retirement, an important consideration is how knowledgeable consumers are about retirement. Call it ‘literacy,’ ‘aptitude,’ or ‘competence,’ do Americans know enough to take on the burdens that come with the freedom of voluntarily saving for retirement?"
This is why, for the last nine years, The College has conducted a comprehensive survey of retirement income literacy. Information was collected on the level of knowledge of 12 key retirement-related knowledge areas. While there has been a good deal of attention on financial literacy, almost all those studies have focused on the accumulation period. This study focuses on those ages 50-75, a period where issues such as how best to withdraw income from assets come into play and how to manage finances in retirement is critical.
Key Findings Highlight Gaps and Opportunities
One of the more eye-popping results that caught The College research team's attention was how well respondents' self-ratings of their retirement income knowledge matched up with their actual scores on our literacy test. “Among those who didn't rate themselves very highly in terms of retirement knowledge, a whopping 73% had less than $100,000 saved up for retirement. Compare that to the group at the other end of the spectrum—those who felt confident about their retirement smarts. 81% of this group had savings above $100,000,” says Eric Ludwig, PhD, CFP®, Retirement Income Certified Professional (RICP®) Program Director and Director of the American College Center of Retirement Income at The American College of Financial Services.
Retirement Knowledge Powers Confidence
One measure—and perhaps the most significant indicator—of retirement outcomes is confidence. The study uses a Retirement Confidence Scale based on respondents’ self-reported confidence that they will feel financially secure, have enough money to live comfortably, and do a good job handling their investments throughout retirement. The 2023 Retirement Income Literacy Study reveals the predicted probability of the highest Retirement Confidence level increases with Retirement Income Literacy Score. Put simply: As retirement planning knowledge improves, so does confidence.
Americans Struggle With Unfamiliar Topics
Direct experience seems to contribute to applied financial knowledge in certain areas, yet the unknown may catch Americans unprepared. Although both overall scores and underlying scores on the 12 retirement knowledge areas are low across the board, respondents show significantly greater knowledge of certain areas having to do with lived experience, including inflation, housing, and Medicare—all of which garner higher scores than the overall average (31%).
The study also explores the topic of longevity—an essential knowledge area to understand when planning retirement income to last a lifetime. Americans consistently underestimate life expectancy and are unaware of how long individuals tend to live, with just over one in five (22%) expecting to live past 89 and just over one in four (27%) able to correctly identify the average life expectancy of a man at age 65. This is particularly concerning because so many Americans plan to supplement their Social Security with their 401(k) and IRA accounts. If they underestimate their own life expectancy, they risk exhausting their savings in retirement—potentially outliving their assets.
One Size Doesn’t Fit All
Retirement planning knowledge is highly variable across different parts of society. Generally, more assets, higher education, male gender, White or “Other” race, and greater life experience (including age and retirement status) correlate to higher Retirement Income Literacy Scores. The research highlights disparities across different demographic segments, including:
- Respondents score higher the more investable assets they have.
- Respondents who have earned advanced degrees score highest, followed by college graduates.
- Men consistently score higher than women, currently and in the past.
- White and “Other” respondents, including Asian/AAPI respondents, score higher than Black and Hispanic respondents.
- Retired respondents score higher than non-retired respondents.
“In the complex realm of financial planning, the idea that a one-size-fits-all approach suits everyone is a misconception. Just as each person is unique, their financial strategies should be tailored accordingly, particularly regarding retirement income planning and considerations for long-term care and health care,” says Kaylee Ranck, PhD, Director, Office of College Research at The American College of Financial Services. “Developing personalized plans that take into account individual goals, projected lifespan, and specific healthcare requirements within the constantly evolving and intricate landscape of retirement is essential for ensuring a secure financial future.”
Financial Advisors Can Help Bridge Knowledge Gaps
The study establishes a compelling link between retirement literacy and working directly with a financial advisor. Advised respondents have higher scores across all knowledge areas, are more financially well, and feel more confident about retirement.
- Participants with ongoing advisory relationships scored 11 points higher on retirement income literacy than those without (38% vs 27%).
- Those who work with financial advisors score nine points higher than those who don’t (50% vs. 41%) on financial well-being, measured using the Consumer Financial Protection Bureau Financial Well-Being Scale.
- Having a financial advisor predicts increased confidence and decreased stress and anxiety, controlling for demographic factors.
“While this most recent iteration of the Retirement Income Literacy Study reiterates the themes found in most financial planning research concerning the lack of financial and retirement literacy, one thing that became abundantly clear this time around was just how important the role of the financial professional is in consumers’ lives,” says Chet Bennetts, CFP®, CHFC®, CLU®, RICP®, CLF®, CFP® Certification Education and Chartered Financial Consultant® (ChFC®) Program Director at The American College of Financial Services. “When we measured financial anxiety and financial stress, those with a financial professional had 20% less financial anxiety and 25% less financial stress.”
With robust results from surveying more than 3,765 Americans aged 50 to 75, the Retirement Income Literacy Study research team plans to release additional data to provide deeper analysis into topics highlighted here–plus additional perspectives yet to be revealed. For more information and to view initial and future results, visit TheAmericanCollege.edu/RILS.
Methodology
The 2023 Retirement Income Literacy Study conducted by The American College of Financial Services measures financial literacy in 12 retirement-related knowledge areas among individuals approaching or in retirement age. Researchers from The College surveyed 3,765 Americans aged 50 to 75 in online interviews conducted in August 2023. The data was collected to match the 2020 U.S. Census for gender and race. Building on studies conducted in 2014, 2017, and 2020, the 2023 study included respondents of all asset levels, whereas prior versions focused on respondents with a minimum of $100,000 of investable assets. The insights derived will shape The College's educational initiatives, collaborations, and thought leadership endeavors.
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ABOUT THE AMERICAN COLLEGE OF FINANCIAL SERVICES
Founded in 1927, The American College of Financial Services is the nation’s largest nonprofit educational institution devoted to financial services professionals. Holding the highest level of academic accreditation, The College has educated over 200,000 professionals across the United States through certificate, designation, and graduate degree programs. Its portfolio of applied knowledge also includes just-in-time learning and consumer financial education programs. The College’s faculty represents some of the foremost thought leaders in the financial services industry. Visit TheAmericanCollege.edu and connect with us on LinkedIn, Twitter, Instagram, Facebook, and YouTube. Discover all the ways you can expand your opportunities with us.
Contact:
Sarah Tremallo
908-967-0381 / stremallo@jconnelly.com
Lindsey Allumbaugh
678-643-1310 / lindsey.allumbaugh@theamericancollege.edu
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FinServe Ambassador on Keys to Effective Practice Management and Recruiting
An alumnus of The American College of Financial Services, a member of The College’s FinServe Network, and an executive business consultant at Diversified, LLC in Wayne, Pennsylvania, Rosenzweig’s career in financial services spans over 30 years – and as he doesn’t hesitate to tell people, it hasn’t always been an easy road.
Finding the Financial Services Profession
Growing up in Minnesota and following the traditional path to university education, Rosenzweig says his first diversion was discovering that college just wasn’t for him. Looking for other opportunities, he worked a variety of jobs until he, along with his brother and cousin from New Jersey, opened a “California-style” restaurant in St. Paul, Minnesota. The restaurant was named one of the top new restaurants in St. Paul in their year of opening. That experience taught him his first valuable lesson.
“There’s a few industries that people are very critical of, including food, medical care, and anything involving money,” he says. “From a client perspective, you don’t mess up any outcomes involving those topics. Because of that, there’s no shortage of opportunity in those professions for those who aren’t afraid to seek it out and pursue excellence.”
The beginnings of Rosenzweig’s ventures into financial services included some real estate investing and breaking into the fields of insurance and banking as they began to broaden their array of financial products to customers. “Black Monday,” the severe stock market crash in 1987, further molded his experience, and surviving that lesson crafted a career of working in bank financial services, global investment banking firms and then, finally, beginning and running his own firm for the last 20 years. Along the way, he noticed some common and troubling trends that made him question the assumptions of those around him.
“I became conscious that certain types of investments very popular in financial circles didn’t work well practically,” he says. “In addition, financial firms weren’t always allowing you to work for the benefit of the client. Many firms were trying to be the McDonald’s of financial services: serve as many clients as possible with little regard to the quality of product or service.”
A People-Focused Approach
It was this experience that led Rosenzweig to the conclusion that would drive the rest of his career: financial advisors and their practices must seek to be holistic in nature, encompassing as many potential client needs as possible while still maintaining excellent service and quality care. This switch from serving many clients to serving clients’ needs more effectively took him away from big firms and into the more independent space of registered investment advisors (RIAs), which at the time were still in their infancy. Today, he works with Diversified, LLC, the result of a merger between his independent practice and a larger multistate, Delaware-based company. In many ways, this merger was the fulfilling and meaningful role he’d been searching for.
“We have a very diverse client base: entrepreneurs with pension plans and 401(k)s, high-net-worth clients that have been with me from my banking days, and a large segment of middle-class clients who are fairly new or naïve in regard to investing,” he says. “Through our diligence, honest approach, and hard work, our clients trust us, and although younger advisors may lack perspective gained through experience, I was able to convey my expertise and decades-long insight in their training. It’s very important to get to know the client, their concerns, their goals, and their hesitations because I’d been where they are, understood their points of view, and had the work ethic and desire to give them excellent service. We developed a strong bond that allowed us, in many cases, to work with three generations of client relationships.”
“It’s very important to get to know the client, their concerns, their goals, and their hesitations.”
Rosenzweig says the benefits of the merger have been an increased focus on advisor education for employees, while also becoming big enough to split up responsibilities like planning, running meetings, compliance, and back-office duties, and departmentalize things he used to have to do by himself. He says these days, he’s been able to transition into a more supervisory role as the second generation takes over at the firm.
“I’m mostly there to make sure clients are confident in the direction the firm is going, especially when we’re dealing with their major inheritances,” he says. “My job is less to manage the day-to-day and more to send a unified message to clients, and with where I’m at in life now, that’s quite a relief. I’ve also been able to broaden my reach through consulting, volunteering, seeking to serve on company boards, and getting to know other prominent people in the industry.”
However, it hasn’t all been smooth sailing. Rosenzweig says he’s had issues in the past with some new hires and even longtime employees not working out, and the lesson it’s taught him has been that trust and value alignment are indispensable to a practice running smoothly.
“When you’re interviewing people, you have to make sure they’re honest, hard-working, and above all, trustworthy,” he says. “Some will get burned out too quickly because the business moves so fast and have to leave. Others may try to take your clients and go elsewhere because they feel you or the firm owes them something. A sense of ethics and responsibility is key to a good hire.”
The Importance of Expanded Education
Another aspect that makes advisors and firms stand out from their competition, Rosenzweig says, is education – and that’s where The College and its programs come in.
“The College does a great job with its retirement, tax planning, and insurance knowledge through designations like the Chartered Financial Consultant® (ChFC®) and Chartered Life Underwriter® (CLU®). What I learned gave me the confidence and knowledge to get creative with helping business owners and others in need of succession planning fund their own retirements,” he says. “There are so many nuances to product uses, tax laws, and other considerations, and even if some clients don’t perceive a difference, there’s still a huge shift in the quality of advice you can give.”
“What I learned [at The College] gave me the confidence and knowledge to get creative with helping business owners and others in need of succession planning fund their own retirements.”
Rosenzweig says another element of his life that has made him better and more successful in his career and life at large is his personal passion: a decades-long study of the martial arts earning him multiple black belts in several martial arts disciplines. “The martial arts emphasize the need to become well-rounded through the exercise and training of the mind, body, and spirit. The strengthening of will and the concept of ‘indomitable spirit’ builds patience, resilience, confidence, and moral strength,” he says. “It would be easy to succumb to circumstances, market fears, client pressure, and self-doubt that could cause me to question my strategy and financial plans to the detriment of the financial health of clients without the moral strengthening my martial arts experience has given me.
In addition to building character through the martial arts, Rosenzweig has cultivated a network of friends and classmates about whom he readily declares, “They have my back, as I have theirs.” He has even acquired new business from fellow martial artists, as the bonds they form in their classes go beyond studying, training, and perfecting fighting skills to a more personal level. “The formation of trust and respect for intelligence and acumen motivates fellow students to come to me, and I am happy to provide a second opinion on their plans or thoughts. Often, this has resulted in new clients for our firm over the years,” he says.
Returning to the financial services space, Rosenzweig notes responsibility for training today is much more on individual advisors – and advisors need to live up to their duty to give excellent service.
“Retirement planning is extremely important in this day and age, especially for retiring business owners. In general, advisors should get as much knowledge as it takes to help their clients achieve their goals in new and creative ways,” he says. “Expanding your opportunities isn’t just an option: it should be a moral imperative for all of us in the profession.”
“Expanding your opportunities isn’t just an option: it should be a moral imperative for all of us in the profession.”
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AI, Prompt Engineering, and Financial Planning
Our thought leaders present on the intersection of AI and financial planning, including how the science of prompt engineering can empower you with the skills to use AI to its greatest potential in your workplace and on behalf of the clients you serve. College and CFP® CE credit is available!
This webcast is only open to members of The College’s Professional Recertification Program (PRP) and available in Knowledge Hub+. Log into Knowledge Hub+ via your Learning Hub.
Presenters
What is Knowledge Hub+?
Knowledge Hub+ is a just-in-time learning and CE platform developed by The American College of Financial Services exclusively for The College's Professional Recertification Program members that curates the wisdom of leading academics, change-makers and innovators, financial planning experts, and practice management leaders into one easy-to-use learning experience for financial professionals.
Knowledge Hub+ delivers the added value of automated reporting of CE credit to the CFP Board and The College’s records, making it easier for financial professionals to fulfill their thirty-hour CE requirements every two years without administrative headaches.
With exclusive live events and new content added quarterly, there’s always something new to learn with Knowledge Hub+.