The Sugar Daddy Podcast
Ready to normalize talking about money? Then welcome to The Sugar Daddy Podcast. Every episode will get you one step closer to your financial goals. Whether that is learning how to invest, budget, save, retire early or simply make better money choices, Jess & Brandon have got you covered in a way that's easy to understand, and easy to implement. Tune in as they demystify the realm of dollars, so it all makes cents, while giving you a glimpse into their relationship with money and each other.
Brandon is an award winning licensed financial planner, and owner of Oak City Financial, with over a decade of experience and millions of dollars managed for his clients all over the United States.
New episodes published the first three Wednesdays of every month.
The Sugar Daddy Podcast
80: Should You Trust AI to Replace Your Financial Advisor?
Financial planners and AI tools can coexist to provide better service, with each bringing different strengths to the financial planning process. In this episode Jess and Brandon discuss the rise of robo-advisors and how they compare (and don’t) to comprehensive financial planning.
In this episode we discuss:
• How AI excels at portfolio management
• How budgeting apps use AI to categorize transactions and provide spending insights
• How comprehensive financial planning differs from simple investment management
• How AI and humans can work together to enhance services
• Robo-advisor fees versus human advisors
Watch this episode in video form on YouTube
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In today's episode we are going to discuss if AI will replace human financial planners like Brandon Hopefully not. We're going to talk about how AI is revolutionizing various industries, what AI can do in financial planning, what AI can't do and why human financial planners will still matter, and how AI and humans can work together to give the best experience. Stay tuned.
Speaker 2:Hey babe, what are we talking about today?
Speaker 1:Today we are venturing into my world a little bit and we are talking about AI, artificial intelligence, but not in the technology space that I'm in for work, but in your space and financial planning.
Speaker 2:Yeah, are they going to take over my job?
Speaker 1:Right, I think that you know it's so funny because people are like oh, ai is so new, ai is so new and AI is not new. So that's first and foremost. I know for many people it feels like it has come out, you know, in the last year or two, maybe three years, but it's actually been around for an extremely long time. But now it is more accessible to us, you know, and we're using it in like the chat, gpt, prep my meals for the week, write me a shopping list, plan this vacation, help me write this email, kind of way. But it's actually been around for quite some time. And so, you know, I think, with the rise of AI, people very much are like is AI going to take my job? And what I typically say is AI is not likely to take most people's jobs, but it could very well replace you if you're not willing to learn about it.
Speaker 2:Yeah, I definitely remember reading a lot of articles, you know, a few years ago, when the rise of robo-advisors started to come out and it was like you know, robo-advisors are going to take over the roles of financial advisors. They can do it for cheaper, they're smarter. All these things and I can honestly say, you know, a few years into this, hasn't affected me and it hasn't affected, you know, other colleagues that I have that are within the field, because I think that there has been a shift in regards to maybe what our primary focus and what our main offering may be, but as far as replacing us, overall, not at all. And personally I use AI within my practice to help become more efficient and help in certain aspects that obviously AI can do significantly better than any human.
Speaker 1:Yeah, one of my favorite uses for AI and I do this almost daily is recording all of my work calls, and then, you know, I get a transcript, I get next steps, I get follow-up items. I mean all of the stuff that you do in work that's very manual, you know, can, can be utilized with technology to make life easier. It's also great, you know, in those instances, hey, if I'm out and I need to revisit a call that I wasn't a part of or you know for you I know you've talked about you know recording, helping it summarize the call, getting the next steps, getting action items I mean those things are the manual tasks that are very labor-intensive, that take up a lot of time, and so AI has a lot of use cases for that. For that I don't know that I would have ever leaned towards a robo-advisor, but I think I've, of course, am biased because I know how much you do for not only our family but for your clients, and you're just not going to get that from a machine. You're just not.
Speaker 2:I also. You know, just like you. One of the things you said that I say that I do is I do record my meetings with clients and all my clients get a detailed recap meeting email with action items, and I use a program called Fathom in order to produce those. It makes my life significantly easier because before I was taking notes and then creating the email myself, as compared to now, it creates it for me. I maybe make a few adjustments in there and then I send it out. So cuts down on the timing that it takes for me to do these things. But I think people have a different idea of what a financial advisor a good financial advisor brings to the table in comparison to what a robo-advisor can do for you.
Speaker 1:Well, do we want to start with what AI can do in?
Speaker 2:financial planning yes.
Speaker 1:Because there are positives. This is not us knocking AI, because obviously we use it every day.
Speaker 2:So, when it comes to the investing aspect, as far as putting together a portfolio, I think AI can do a significantly better job, and a lot of advisors are using AI to put together portfolios Because, basically, when it comes to putting together a portfolio and analyzing, hey, how should we put this portfolio together based upon this person's goals, their risk tolerance and what they're looking to achieve, a lot of that is based upon historical performance. You may have heard the saying. Like you know, historical performance is not indicative of future performance, but that's all we have really to look at in order to maybe have an idea of what's going to happen in the future. And obviously, ai can do a significantly better and much faster job of analyzing historical performance than any human or any number of humans put together. So, from a portfolio management standpoint, you have AI. That's being incorporated into pretty much almost any platform for that.
Speaker 1:But aren't you also able to utilize that for your clients, oh?
Speaker 2:100% Right. So the thing that I think I have a better edge on when I'm using it, as compared to, maybe, a client using it by themselves, is that any technology that you're using, if you have a better understanding of the subject matter and what you're using that technology for, you are going to be able to use the technology better. So think about it this way If you were in high school and you were in math class, all right, and you have a math test and you have a calculator, you have a calculator that can help you do all the calculations, but you have no idea which equation you need in order to solve the problem. It doesn't matter if you have the calculator there, you don't know what equation applies to the problem that you're trying to solve.
Speaker 1:So you don't even know what to like chemistry class.
Speaker 2:So you don't even know which calculator. You don't even know which information you need to put into the calculator. Even though you have the tool that can provide you with the answers, you don't know what to put into it in order to get out the answer that you need.
Speaker 1:Yeah, that's a really good call out. Even you know. Again, I think most people listening probably have tinkered once or twice with chat, gpt. But it's all about the prompt. If you put in a garbage prompt, guess what Garbage in, garbage out. So it's the same concept of you have to know how to utilize the tool, you have to know how to prompt the engine. You have to understand that it's training and learning from you. If you are not utilizing it correctly, then it's not being trained correctly and you're never going to get the best possible outcome.
Speaker 2:That even goes back to conversations we've had about using LegalZoom to create a will. The issue that you run into there is that it's based upon the information that you put in. Now, you might be putting information in and you might be putting the wrong information. However, it's actually giving you the correct information for what you put in.
Speaker 1:Have you been listening to our podcast and wondering how am I really doing with my money? Am I doing the right things with my investments? Am I on track to reach my financial goals? What could I be doing better? If you answered yes to any of these questions, then it's time for you to reach out to Brandon to schedule your free yes, I said free 30-minute introduction conversation to see how his services could help make you the more confident moneymaker we know you could be. What are you waiting for? It's literally free and at the very least, you'll walk away feeling more empowered and confident about your financial future. Link is in our show notes. Go, schedule your call today.
Speaker 1:Yeah, but now that we are going through that pre-nup, post-nup process right for legal Zoom, et cetera, et cetera we've had those conversations of, like cheap can be expensive, right, You're going to Staples buying the DIY kit out of the box, You're printing it offline. Even the other night we were watching Love is Blind and she had printed off the prenup papers and put them down and said you know, here you go, which clearly that was not a collaborative process. But again, what are you putting in and what are you going to get out? So you think you're doing the right thing, but who knows what you actually are getting in, that legally kind of binding contract. It's certainly not the best it could be.
Speaker 2:I think another thing that AI does a really great job is there's tons of different budgeting apps. So essentially what a lot of these apps are? Account aggregators. You put in information for the different accounts you have.
Speaker 2:You know your bank account, credit card, whatever savings account, whatever it may be, and it's able to pull in all the information from the transactions, categorize them and give you some insights to your spending habits. I think obviously AI is great for that, because the only other way to track that is manually and that's looking at your statements at the end of each month and maybe putting into a spreadsheet and doing all that hard work, which obviously some people love doing it, and that's you know. If spreadsheets are your jam, be my guest, not my jam. I much rather work smarter, not harder.
Speaker 1:Well, and everybody's living on their phone. So the reality is is most of us would probably want to check our budgets and our spending on our phone, because it's our little pocket computer and so it's right there. Do you have any favorites now that mint is gone favorites.
Speaker 2:Now that mint is gone um, mint became I want to say became monarch money?
Speaker 1:no, it became. I think it became monarch people are raving about monarch.
Speaker 2:I don't think it's free.
Speaker 1:It's not free but people love the interface. They love that it's. It's really great kind of right out of the box, but you can also customize it for your needs and the u UI UX is fantastic. I've heard nothing but good things.
Speaker 2:Yeah, I haven't used it personally since it became monarch money, since I have planning software that I can use for that that I already pay for.
Speaker 1:We're not trying to have multiple subscriptions for the same thing.
Speaker 2:But even in those scenarios like so, for example with the account aggregation and categorizing of transactions, Sometimes AI doesn't get the categorization correct.
Speaker 1:Right.
Speaker 2:And you have to go back in and do it manually. But the nice thing is that it learns and it recognizes, when the new transaction comes in, where it should go. But there is still some human aspect to checking to make sure that things are done correctly and not just simply relying that the AI technology is at 100 percent.
Speaker 1:Right. Even we've had to do that in your planning software RightCapital where, I don't know, maybe like CVS was shopping and we know that it's pharmacy benefits because we're not shopping at CVS type thing. So you have to put a little bit of work in to get it to where you want it to be. But then it will work for you and it will learn and as you train it it will get better. And it will learn and as you train it it will get better.
Speaker 2:And one other way that people are using it, which really I wouldn't say is applicable to most of the population, is algorithmic investing. So that's going to be like some of the people that are doing the trading day trading and they're looking at you know times to buy, sell stuff of that nature. Now, obviously, that doesn't necessarily apply to most people, but it analyzes patterns and it does a much better job of analyzing patterns than you know, a single individual could do. And that's another way that AI is definitely being used and can be beneficial.
Speaker 1:Yeah. Are there any other ways that you feel like AI has a benefit in the financial planning world?
Speaker 2:Honestly, I mean other than maybe some of the back office stuff, when it comes to paperwork being done and stuff of that nature, yeah, those jobs could potentially be downsides, because I don't think they're going to be eliminated only because you do have to have somebody to manage, obviously, the technology itself to make sure things are still done correctly. But I definitely see from that standpoint like transactional standpoint. But the main thing you know from a client facing interaction that I would have, I would say it's more or less the investing aspects of the portfolio management, stuff like that.
Speaker 1:Yeah.
Speaker 1:So if we're thinking AI robo advisors right, everybody online is like, you can do it yourself. You don't need to pay somebody and like yes again, if you want to spend hours and hours and weeks and weeks and months and months learning proper financial planning, all the rules, the tax implications, you know, and then, on top of that, you know the checkups, we have an entire episode on DIYing your finances and all the things you're going to have to consider. But most people again, this is not where you spend your time, so you will miss things. So, talking about the robo-advisor, you know, is the robo-advisor going to ask you to update your beneficiaries after you go through the divorce? Is the robo-advisor going to tell you to up your life insurance now that you have kids or you bought a bigger house or you got a new job and you're making $200,000 more? Is the robo-advisor going to help you really make the most out of the comprehensive portfolio and all of the life stuff? I feel like the life stuff is what's so important that you don't want to miss out on.
Speaker 2:Yeah, I mean there is a draw to the Betterments Wellfronts, schwab, intelligent Portfolios and the main draw to that for most people, in all honesty, comes down to cost. That's. The reality of it is that I think people are trying to find the least expensive solution, and I completely understand wanting to make sure that you're not overpaying and being cost conscious. However, cheap isn't always the best option.
Speaker 1:Cheap can be expensive.
Speaker 2:And, at the end of the day, that's what this is, and the thing is, too, is that I think it's also there is full financial planning and investment management are not the same. Now, investment management can be part of financial planning, but investment management is not full financial planning.
Speaker 1:Can you expand on that?
Speaker 2:Yes. So with investment management, all someone is doing is saying, for example, like you have $100,000. You want to invest it in the market. It might ask you some questions around risk tolerance, which is a questionnaire that I give to people to just simply understand how they manage risk, how they react to risk. It's not the by all means indeterminate factor of how we're going to invest, but it's something that we can have a conversation about Now with a robo-advisor. It is, by all means, going to be the end result. So, for example, you might be someone that wants to be aggressive, but once you go through the risk questionnaire, you end up becoming conservative, and with most robo advisors, they're going to just automatically put you into a conservative as compared to working with me. Now we have a basis for a conversation. Why did you answer the questions this way? Did you understand the questions? And then maybe we might have a I have a conversation that leads you a better understanding of why we should be more aggressive. Thus we can now become, you know, invest in a more aggressive manner.
Speaker 2:As compared to a robo-advisor, it's really not going to have that back-to-back interaction and that explaining factor that comes along with it. Now, what it's going to do is simply, you know, taking that risk assessment how long do you approximately want to be invested in the market some aspect, because that's also going to be a determining factor of how aggressive you can be and then it puts together a portfolio for you, so it just simply manages the money that you gave it. So you hopped online, you had $100,000, you put it into the robo-advisor and they invest it for you. Now the one thing they're not going to do is make sure hey, do you have an emergency fund set up? Can you actually invest all this $100,000? Or would it be maybe better if you invested half of this $100,000 because you don't have an adequate emergency fund?
Speaker 2:Also, they didn't ask you questions about any other goals that you maybe want to achieve. Oh, by the way, you want to buy a house in the next two years. Maybe you don't invest the entire $100,000 so that you have a down payment for the home. It doesn't ask you all those questions. It's a very basic, straightforward kind of like. If you're going to be a DIYer, it helps out. Or if you're someone that's maybe just getting started in investing, it can help you out as far as doing that, but it's not full financial planning at all. It is strictly investment management. You give it the money, it manages it. It doesn't ask you any other questions.
Speaker 1:Yeah, and I know you're so big on goals and what you say. It drives me crazy. But I obviously understand why you say this all the time when people ask you questions and your response is it depends. It depends. And, like you said, should everybody max out their 401k? It depends. What are your goals? Are you going to need to be more liquid? Do you? Are you saving for that down payment on the home, whatever that might be?
Speaker 1:Like you said, the robo advisor for lack of a better word is not going to give you that human touch of conversation to really dig into what are your goals? What do you want your money to do for you? How do you envision your life into 5, 10, 20 years, etc. So I think those are the conversations that really I mean, you're great at them but really help people understand. Oh, these are why we're making the decisions we're making. When you were talking about, you know, plugging in your money, talking about your, maybe your retirement age, it reminded me of our 401k episode where we talked about the target date fund and like, yeah, maybe if you're auto-enrolled and you don't do anything, you'll be okay. But then we talked about my specific 401k, which is more aggressive than what the target date fund would have provided, because we know we're not touching that money. We know that this is a long-term play, so let's be as aggressive as possible, because I'm 20 years away from quote-unquote or 25 years away from quote-unquote retirement age, so let's maximize those years.
Speaker 2:I think so that with the robo-advisors they're also going to basically operate kind of on the rule of thumb rather than the nuance.
Speaker 1:And so much is nuanced right with people's situations. It's personal finance Right. With people's situation.
Speaker 2:It's personal finance.
Speaker 1:Yeah.
Speaker 2:So you know, rule of thumbs don't always work for everybody at a given time. So the biggest thing with it, too, is that you're going. You also don't get this aspect of, for example we were literally talking about the other day. There's a lot of rules in place that people can easily get confused. So, for example, one of the things that I don't see enough of on social media, I believe, is that with IRAs, individual retirement accounts if you just hopped on social media, you would think that everyone could take advantage of a traditional IRA and the sense of putting money away pre-tax. So when you put money into the IRA at the end of the year, when you file your taxes, you're letting them know that you put, say, $7,000 into an IRA and that lowers your taxable income for the year by $7,000 because it's going in pre-tax. So they think that they could just all take advantage of that pre-tax contribution.
Speaker 1:That's what the internet says, so it's got to be real.
Speaker 2:No. Once you exceed a certain income threshold, you cannot deduct that contribution in an IRA.
Speaker 1:So you can't just to be clear, because we had a long discussion about this you can put that $7,000 in the IRA. That is absolutely go put that away. If you have it, you know, let it sit there, let it grow. But what Brandon is saying is you, if you are high earner, you might not be able to get the tax benefit which is really why people want to put that money in the IRA.
Speaker 2:I mean there's other benefits to it. Because, um, I mean there are other benefits to it, but not in the same fashion as if you were able to take the deduction, because there was different ways that I would go. There's a different way that I use it for for clients that we don't need to get into here, but you would have the internet, would have, you think, then everyone can do that deduction and it's stuff like that. When it comes to the little specific rules or, like you know, with contributions to a Roth IRA, if you make a certain amount of money, you can't contribute directly to a Roth IRA. You have to do a different process. And it's those little rules where, like, if you don't know them, I don't know if AI is going to give that answer to you, because it's based upon what you put in and how you prompt it.
Speaker 1:Yeah, well, and I think, too, what you're kind of alluding to is it really is going back to like the goals of what you want your money to do for you, because money is a tool. So also, I think you have so many conversations about the emotional aspect right Of money, and you're you have these conversations all the time and you're always joking around saying like I should have gotten a psychology degree, because so we all have an emotional attachment to our money. We all want to do what's important to us with our money, and so I feel, like you, you do a lot of handholding and reassuring with your clients to let them know, hey, we've planned for this. Or you're, you're good, go, you know, get that nice closet install. Or go get that bathroom remodel. Or yeah, you can afford the second lake house, like I feel like you are constantly reminding people of like hey, we've done this work and now you're actually in a position to spend the money the way we've planned for it. Go, do that, it's okay.
Speaker 2:I mean, there's so many things in life that we know that we should do and it's not just within finance. For example, your health. You should need a bunch of unhealthy food, you should exercise. We all know these things, but why don't we do them?
Speaker 1:Because there's nobody holding us accountable. We don't have a partner. Buddy workout accomplice. We have to get over our head trash.
Speaker 2:We have to deal with, you know, maybe past traumas.
Speaker 1:So much.
Speaker 2:And understand a financial literacy like you know, a lacking of understanding of certain things. There's so many things that go into making a decision and then taking action, and it has nothing to do with the black and white numbers.
Speaker 1:Yeah, and you help move people along with that decision making, with the actions that need to be taken. I don't know that AI is going to build you a to-do list of what to do, and even if it does, it doesn't make you do it, right, right. And even if it does, it doesn't make you do it, right, right.
Speaker 2:So, like it's not, ai is not going to constantly call you and send you emails and remind you of your goals that you were, you know you want to accomplish and make sure that you get these things done. Yeah, Because if it was simple, as you knowing, you needed to know the information in order to do something AI doesn't need to help you. We had, you still have the internet. You can still look things up. You could have been already doing that. So if you're someone that has a hard time with actually completing stuff, it doesn't matter what AI does until they get to the point where AI can literally be a second version of
Speaker 2:you. That does it. Yeah, it doesn't matter. You know you're not. You have to take the action. And also, the thing is, too, is that we always talk about what the financial planning aspect is. It's not a one time thing, it's continuous. So you're going to keep continuing to revisit the plan, continuously, monitoring things in your life. What's changing, what has changed in my life that now is going to alter the plan. Like you know, if you're somebody that has, you know you're married, have two kids and that's all you planned on having. I have my plan in place. Oops, have two kids, that's all you planned on having. I have my plan in place. Da da, da da. Oops, I didn't get a vasectomy. Now we have a third kid and we have friends.
Speaker 1:We all know where babies come from.
Speaker 2:That has happened too, where they didn't necessarily plan to have three kids, but they're happy they have them, but it changes the plan. My point is is that you're going to always have to constantly change things and sometimes you might have had something changed in your life and you, by yourself as an individual, aren't going back to revisit a plan that was based upon different parameters, whereas as your advisor, I'm constantly following up with you hey, what's going on new in your life? And even giving some prompts sometimes, because sometimes people are like, oh no, nothing's new. Well, you know, job's still the same. You know, still making the same income, da, da, da, stuff like that.
Speaker 1:Oh no, I got a promotion and da, da, da, da, da, right the prompt memory is as far as like what has actually happened.
Speaker 2:Ai doesn't do that.
Speaker 1:Yeah, I think one of the other things you know talking about that emotional aspect of finance is I mean, you have clients where something will happen right In this climate. Something's constantly happening in the news and we can can't even keep up and we're just being flooded with like information, misinformation, and you're having to decipher like, oh my gosh, should I be panicking right now? So I feel like you also have that. You, you often say that you're kind of the stop, the stop sign between your clients and bad decisions, Whereas, like, if you're just kind of plugging things into a robo advisor, they're not going to say, hey, don't forget, this is a 20 year plan. We're not going to panic, we're not going to move money, You're not going to start storing it in a shoe box under your bed, Like it will be okay.
Speaker 2:I'm the wall between them and doing something stupid. Yeah, and at that I'm not saying my clients are stupid, because my clients are extremely brilliant people in so many different ways and way smarter than me in a lot of aspects.
Speaker 1:But even this.
Speaker 2:Yes even the smartest people that thoroughly understand the plan that we are working on, they have great financial literacy, they still are emotional human beings and you have an emotional attachment to your own money.
Speaker 2:So, even though you know hey, I know this information from a black and white standpoint, but this is what I'm feeling I have those conversations often with clients to be like to bring them back down, talk them off the ledge and also just reinstill confidence and the plan that we had put in place and we talked through. And often it's sometimes just me listening to what's going through their head, because I don't want to just simply say to someone don't worry about it, because that doesn't work. It doesn't work that way. I need to really listen to them and understand what it is that is worrying them and just have a conversation, human to human, human, to maybe help not maybe eliminate all their you know fear or emotions that are going on at that moment, but to lessen them and kind of bring them back to the logical side of thinking when it comes to certain things yeah, what about the like ethical fiduciary responsibilities?
Speaker 1:I mean, I feel like I'm sure you're signing your life away. You know you're going to click that like accept terms and conditions that nobody reads but we probably should. And then something goes wrong and you're like oh wait, I didn't mean to do that. And they're going to be like cool, bro, you did it and you clicked accept conditions, like what about that kind of stuff where people might make big mistakes that cost them a lot of money?
Speaker 2:Well, I can say from the fiduciary standpoint for example, a lot of these AI products are specific to the financial institution that you're working with. You know, and at the end of the day, that financial institution is trying to make money. So, even though they're trying to help you out, bottom line is that they're trying to make money, stay in business, make money, make their shareholders wealthy. So, ultimately, at the end of the day, some of the things that they may suggest, the things that they may do, aren't always necessarily putting you first. It's going to be putting the company first. Whereas I'm not beholden to a specific company, the only quote, unquote company I'm beholden to is my own company, and the basis of my own company is to do what's best for my clients.
Speaker 1:Well, and that's why you went independent to begin with because, that way, you can use whatever company you want for whatever products are needed, without having to feel like, oh, I can only you know prescribe you Fidelity products or only Schwab products or only whatever. Like now you can go anywhere and make sure that your clients are getting the best product, the best price, etc. I feel like that was one of your really big motivators in opening up your own planning firm.
Speaker 2:Yeah, because when you're utilizing just one company, then, like you said, like you're not maybe using a full tool belt. You only have a few select tools. When I switched to being independent, I could have an entire tool belt plus some toolbox tool shed everything.
Speaker 1:Well, I feel like, too, one of the things that comes up often is like life insurance right. So if you're, yeah, you can get life insurance through State Farm, but you're going to get State Farm life insurance right, so do you're yeah, you can get life insurance through State Farm, but you're?
Speaker 2:going to get State Farm life insurance right, so do they have. Well, you just made a face, well, the thing is all right. So I'm not saying if you have State.
Speaker 1:Farm life insurance.
Speaker 2:That's great. It's better than having nothing. I am of the mindset where you can't do everything great. Mm-hmm I don't think of life insurance in State Farm.
Speaker 1:Walmart has everything. Walmart doesn't do any like Walmart doesn't like.
Speaker 2:Walmart has everything. Walmart doesn't do everything? Great, they do everything. Okay, now, granted, obviously the company makes a ton of money.
Speaker 1:We're not gonna even go there, but but I think I would prefer do you think the best mechanics work at Walmart?
Speaker 2:I'm just saying like if I was right, if you have a brand new BMW, are you taking it to Walmart if mechanics get fixed?
Speaker 1:or auto tune.
Speaker 2:No, no, you're going to take it to the specialist and, like, for example, state Farm, does do certain types of insurance Well homeowners insurance, you know, boating insurance, stuff of that nature, that is their bread and butter. They were just like we sell all these other types of insurance.
Speaker 1:So why not offer life insurance? And life insurance is not their main product? Crossfitter, but you're super fit, but technically your BMI is, you know, making you morbidly obese. Or maybe you enjoy some cannabis every now and then, right Like. You know which companies to go to for those things, whereas you know maybe the state farms of the world are going to deny you. But you know who to reach out to for specific types of policies, to where people are going to have the best chance of getting properly insured at a right you know, at a good rate, etc. So again, that personalized, nuanced experience you're not going to get from a robo advisor. You're not going to get that from going to state farmcom. No offense to state farm, if you want to sponsor the podcast, let us know, but you know I mean it just is what it is. And so, again, just going back to that human touch, understanding goals, nuances, things that are specific to you, a robo-advisor is not going to do that very well.
Speaker 2:Also, the thing is with a robo-advisor, what they're really good at is logic, so they are often going to provide you the most logical answer to the question that you ask it. I know from personal experience within finance that sometimes the most logical answer is not the best answer to actually have in practice with somebody based upon their personal individuality, and you're married to me, so you know that sometimes logic is not the answer that I choose because it just is not going to me.
Speaker 1:So you know that sometimes logic is not the answer that I choose, because it just is not going to work.
Speaker 2:I always, you know, when I'm talking to clients, I always say, like you know, more than likely there's multiple ways to accomplish a given goal.
Speaker 2:Now, for me, if there's a mathematical aspect to it me personally, individually I'm going to choose the most logical mathematical way to go about something. So, for example, let's just say debt pay down, I'm always going to want to attack, say, the debt with the highest interest rate so that we end up paying less technically over the time period of paying off the debt. That doesn't always work for some people. Some people need those small wins where they're tackling the debt with the lowest balance but it might not have the highest interest rate, so technically over the time frame of paying, tackling the debt with the lowest balance but it might not have the highest interest rate, so technically over the timeframe of paying off the debt, they do pay a little bit more. But this is the way, from an emotional and behavioral standpoint, that would work for them to be on board with doing it and stay on the course, and AI is not going to necessarily give you that.
Speaker 1:Yeah, is there a way for AI and financial planning humans to work together?
Speaker 2:Oh yeah, I mean, I personally use AI on a regular basis within my practice. We kind of said it earlier. One of the ways that I use it is within my meetings and so that I don't have to actually take notes myself, because I used to take notes by hand back in the day which is distracting.
Speaker 2:It is and but it's the only way that I was at the time was the only way I could get the information and I didn't like it, but like it's what I had to do. Now I have fathom that I use as my meeting note taker and I could be fully engaged in the conversation and it's taking all the notes for me, and then it creates my follow-up email with the uh for the recap and the action items that need to be completed before our next meeting.
Speaker 2:If you want to sponsor the podcast, yes, does a great job of that and, once again, when it comes to analyzing portfolio construction for clients, 100% use chat, uh, gbt, gpt for that, all other types of AI, um, because the reality is is that, once I just said, you have to learn how to utilize the tool from a prompt standpoint for what you're trying to accomplish, and it's easier to do that when you have a firm understanding of the knowledge of the um subject matter that you're dealing in. You know, like someone who doesn't have the background that I have is not going to be able to hop on chat, gbt and recreate the same things that I do. You're just not, because you don't have the knowledge base of what the feed chat, gpt, and that knowledge base came from hours upon hours upon years upon years of understanding finances.
Speaker 1:Right, well, so you can use AI.
Speaker 2:Finish the sentence. You can use AI or robo planners if, say, you are a 25 year old, you have a W-2 income, you don't own a home, you don't have children, you're not married and you just have a little bit of money that you are looking to invest outside of your 401k plan, that you want to open up a traditional IRA and you qualify to contribute to a traditional IRA, but you need some help putting together a portfolio.
Speaker 1:Okay, one thing we didn't talk about are the fees. Obviously, you're not getting this for free, so is there a range of what you can kind of typically see.
Speaker 2:I would say that I was seeing maybe anywhere from like 0.2 to 0.4% of the percentage of the. But I can kind of equate it to you have financial advisors who will do that in significantly more, for anywhere from 0.75 to 1.1%.
Speaker 1:Yeah, but even you know again, the internet will show you that paying somebody over 20 or 30 years 1% of your portfolio can cost you hundreds of thousands of dollars.
Speaker 2:So I would say this if you are able to 100%, completely replicate replicate replicate the advice, performance, everything that comes with an expert financial planner who has years of experience. If you can replicate that on your own, then yeah, obviously you shouldn't pay a financial advisor. You probably should just be one and do it yourself. Then yeah, obviously you shouldn't pay a financial advisor. You probably should just be one and do it yourself. But if you cannot do any of that, are you going to pay a financial advisor? Yes, but I can guarantee you that you're going to lose significantly more money by making errors.
Speaker 1:Oh, and time, time and money. Yes, time and money.
Speaker 2:Because it's not an apples to apples comparison, because the, you know, the statement that you just made is assuming that the person who is investing on their own, as the individual consumer, has all the knowledge and can do all the things that the financial planner does yeah, and that's not the case.
Speaker 2:Not the case, yeah like I said, if it is the case, then you are the point zero, zero, zero, zero. One percent of the population. That is not a financial planner that knows the information, but more than likely you work in some aspect of finance. Like I have yet to meet someone that has no connection to working currently in finance or previously worked in finance and is able to do these things. And even if you work in finance, you can work in completely different areas because you have people that are, you know, working like derivatives. You know which is a much more complicated financial product, but they don't work in personal finance and they also understand emotional bias still comes into it, even sometimes when you know exactly what you're supposed to do yeah, so you should work with a human financial planner if.
Speaker 2:If none of the things I just previously said apply to you, you have a family, you have a business, you have complex estate planning needs.
Speaker 1:You're preparing for retirement major life changes.
Speaker 2:Honestly, at the end of the day, if you're not a DIYer, Like a true good DIYer If you're not a true. Diyer that's going to consistently keep up with this. You have the time to do it, you enjoy doing it. Then you're probably going to get a little bit much, not probably. You are going to get much more bang for your buck working with a good financial planner. Now remember what I always say. I always say good because there's bad in every industry.
Speaker 1:Yeah.
Speaker 2:But if you find one that works well with you and your personality, then their you know, their fee is going to pay for itself 10 times over.
Speaker 1:I mean, I think, too, what you said earlier about that accountability, the handholding, the, actually the taking action part right, that's something we talked about early on in 2025 is like this is the year you should take action. I mean, we have friends who are financially very savvy, multimillionaires, etc. And they still, right, like they don't have wills, they don't have trust, they don't have things in place to protect their assets in the way that you would want to protect your assets. Again, it has nothing to do with how smart you are. Sometimes. It's just a matter of not prioritizing what you know you should be doing from a time perspective. If you work with the Brandons of the world, you know somebody that's a good financial planner. They are going to make sure that you get those things done, and that could be the difference between probate and losing generational wealth. I mean Probate and losing generational wealth.
Speaker 2:I mean and the thing is too is that you can make a small error in one given year and it just builds upon itself year after year. So, for example, going back to the example of talking about contributing to, say, a Roth IRA, and you actually make too much money to contribute to a Roth IRA, you have to take certain steps to either take that money, take that contribution back out, which also does come with a penalty, or you could what's called recharacterize it into a traditional IRA. Whatever it may be, if you don't do that, you are going to be penalized, and it's not a one-time penalty. Now, that contribution that's in there, that should not have been in there, and it's also growing, you are now going to be penalized on a daily basis, oh, daily daily until you fix it.
Speaker 2:That's just the irs rules and guidelines. With that that you were going to be punished like once it, once you pass the deadline for the standard time frame to correct it without any sort of penalty. Once you pass that deadline, that penalty is going to be assessed daily until you fix it.
Speaker 2:So if you don't know that that issue exists now, imagine you know 20 years now later yeah, I mean, you never know what you don't know like you know, say, you say you had, like I said you had that one year, but then next year, the year after that, you realize, oh, you know, I make too much, I can't do this again. You never fixed the first problem, wow, and now it's just compounding. So, like I said, there's small things like that that if you don't know that and you don't specifically put information like that into these AI tools, you're not going to get the answer out that you really need to make sure that you're doing the right thing, and that's where advisors come to play, and that's where advisors come to play Also too. For example, if you're working with me and I told you to do something and I was wrong, I have E&O insurance. You can sue me.
Speaker 2:So for example I'm just simply stating that if I told you to contribute to a Roth IRA and you don't make enough, you made too much money to contribute directly to a Roth IRA and you have that issue. You could turn around and sue me, so you have a fallback in regards to if that issue occurs With AI. You're just SOL.
Speaker 1:Yeah, you got got Got to fix it. So what would you say are the main takeaways between robo-advisors working with a human? Do you have any challenges for our listeners today? What do you want them to do?
Speaker 2:First and foremost, I would say, understanding from a basic, high level view who you are as a person.
Speaker 1:You said that a lot of times. Who are you?
Speaker 2:Because everything the way that you go about doing certain things like, for example, from a financial planning standpoint it's based on understanding, first of all, who you are as a person, because that's the one thing that I'm trying to understand when I sit down with a client first who are you as a person? Because not the same different people need different things and they're going to react to things differently as well. So understand who you are as a person. Are you a diy? Are you not a diy? I would say 99 of the population. I honestly believe that there's a much smaller percent of the population that's DIY-er than what people believe.
Speaker 1:Yeah.
Speaker 2:When it comes to their finances, like truly being able to be a DIY-er.
Speaker 1:But even then, you've chatted with DIY-ers and there's always something that they miss and, honestly, it's basic.
Speaker 2:Often it's something basic. I'm like did you look at this? No, that's the first thing I feel like, did you?
Speaker 1:look at this, no, and that's the first thing I feel like I mean, have you met anybody where you're like, yeah, they're a true awesome DIYer.
Speaker 2:No.
Speaker 1:Cause I feel like all the conversations we've had, I mean outside of other financial advisors. No, no, no, Like normal people, no yeah.
Speaker 2:Cause you don't have time. Right, you don't have the time. Right, you don't have the time. It's just. The reality is that you know everyone that I've met that says they're diy, they have a lot of other things going on in their life and are they a diy because they're trying to save money? Oh always.
Speaker 2:That's the only reason people diy yeah that's the only reason people diy is they want to save money, which is, you know, I understand, because you know me, I'm a frugal person by nature as well. But I also realized that there's certain areas that make more sense to maybe not cut corners and just just for a buck Um, so are you a DIY or not? But then there, like I said, there's ways that you can use AI, but you need to know when to use it and when not to use it, you know. So, if you are just simply, if you really don't want to have a conversation about how to invest a certain amount of money, you just want a very simple, straightforward, vanilla way of investing it, a AI can help you out with that 100%, and it also can make some things a little bit easier. So, like, one of the things that, like I've used the Schwab portfolio investor with is like direct indexing. Now, that's going to go over a lot of people's heads, but that's just me stating that there are uses for it.
Speaker 1:I mean, if you're not budgeting or tracking your spending, maybe a good place to start with AI in finance would be to download one of the budgeting apps and try to get organized and really understand well what money is coming out, what money is coming in. You know, oh, you're double paying for this subscription, whatever it might be. You know, it's a good way to go ahead and aggregate that information.
Speaker 2:I think in certain aspects, it can be a learning tool to help you along the way to increase your financial literacy. So, for example, like if you're a beginner, hey, I'm a 25-year-old male. I make approximately this amount of money. I am new to investing. What are the top five books on investing you would recommend that I read?
Speaker 2:Love that, or podcasts you should listen to, or podcasts yes, it helps tailor the information in some aspects if you know what to put in now. Like I said once again, ai in of itself is something that you have to learn and understand how to use, to get better at it and actually fully utilize it, where I think majority of the population doesn't do that or doesn't even care to do it at this point in time yeah but also once again time all this comes back to time, like, if you have the time and you want to utilize your time this way, hey, more power to you.
Speaker 2:but I could tell you for me, for me personally, even though I do this for living myself we're hoping to get to a point, money-wise, where a lot of this stuff maybe I you know I'm overlooking it but handing it off to somebody else, because instead of me spending so much time doing it, I want to spend time with my family and my kids.
Speaker 1:Yeah, absolutely so. Challenge figure out how you can use AI in your life, if you have used a robo-advisor of some sort, and whether you had a great experience or not so great experience. You know, slide in our DMS. Shoot us an email.
Speaker 2:We'd love to hear all that stuff.
Speaker 1:Yeah, we would love to cause.
Speaker 2:It's just my opinions. That's like this isn't, you know, fact-based. So I'm always open to hearing other people's experiences.
Speaker 1:Yeah, and if it's been a good experience, you know, certainly let us know. If you have a Ooh, a horror story, maybe let us know.
Speaker 2:Or you know, if you already have a financial advisor, you know, let us know about how that experience far exceeded anything that AI could currently do for you.
Speaker 1:Yeah, that's a good call out too. So, all right, hopefully this conversation was informational, entertaining, informative all the things we are glad that you're listening informative all the things we are glad that you're listening. If you have not yet left us a review, especially on apple or spotify, please do that. I know we put it in every newsletter. It's on every single episode. We talk about it all the time. But you leaving a written review on apple helps us get our podcast in front of other people, and that is is what we are working very, very hard for. So please take the 35 seconds to leave a written review today, if you haven't already. We appreciate you and we'll talk to you soon. Don't forget. Benjamin Franklin said an investment in knowledge pays the best interest. You just got paid. Until next time, and share this episode with your friends, family and extended network.
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Speaker 2:Our content is intended to be used, and must be used, for informational purposes only. It is very important to do your own analysis before making any investment, based upon your own personal circumstances. You should take independent financial advice from a licensed professional in connection with, or independently research and verify any information you find in our podcast and which you rely upon, whether for the purpose of making an investment decision or otherwise.
