By James Woodfall and Cliff Lansley
The world is rapidly changing as AI technologies advance. Financial planning will change too as clients’ expectations change in response to new technologies and ways of working. Today, new entrants to the financial planning profession must balance maintaining a human connection with adapting to new technologies, which may redefine the profession.
For next-generation planners, future-proofing lies in mastering emotional intelligence to strengthen client relationships and embracing AI as a tool to enhance expertise. A hybrid role approach may be required, whereby financial planners utilise the power of empathy alongside technological efficiencies.
The Changing Landscape
Financial planning has always been about far more than the numbers. Published in the Journal of Financial Planning in 2009, research by Sussman & Dubovsky found that 89% of the financial planners they surveyed agreed they undertook non-financial coaching and counselling with their clients. Those who responded yes estimated they spent 25% of their time on their client’s non-financial issues. The types of issues clients brought to their financial planners included health, marital problems, dealing with death, legal problems, career changes and legal or family conflicts. It can be challenging to quantify the value clients perceive in being able to discuss highly personal issues with a trusted adviser. For the financial planner, assisting with these challenges requires high emotional intelligence and the ability to respond with empathy.
AI and chatbots can offer automated advice, analysis and portfolio management. According to the most recent EY Wealth Report (Ernst & Young, 2023), clients have indicated a willingness to engage with multiple providers over the coming 3 years, reducing reliance on one provider only. The use of FinTech is predicted to double from its current level. Users of FinTech are seeking digital financial planning services alongside investment management, which are currently being offered. Clients globally prefer face-to-face human interactions at account opening and during the construction of financial plans. However, according to EY, 20% of clients globally would opt for a fully digital financial planning service if it were available. These clients may have yet to experience and value the non-financial benefits of having a trusted human financial planner.
These trends highlight that while technology offers clients more alternatives, they still value the human connection that financial planners can provide. However, if planners are to remain relevant, they must demonstrate the value of their unique, non-financial benefits.
Emotional Intelligence: The Financial Planner’s Advantage
Empathy is a core component of emotional intelligence, allowing planners to connect deeply with their clients. According to Goleman (2017), empathy has three distinct kinds:
· Cognitive Empathy: understanding another’s perspective
· Emotional Empathy: being able to feel what someone else feels
· Empathic Concern: understanding what someone needs from you.
AI can detect emotional signals from the user it interacts with, using tools such as facial recognition, voice tone analysis, and natural language processing. AI currently can do a reasonable job of identifying emotions, with about an 87% accuracy in one study (Velagaleti et al., 2024). AI can use the information to respond to emotions appropriately. These ‘empathic algorithms’ are already being applied in healthcare, where AI chatbots are providing cognitive behaviour therapy, or in education, where AI can adapt the pace of learning to the student. In customer service, highly personalised responses can be provided to text and voice interactions, enhancing customer satisfaction and loyalty.
However, all AI can do at present is use cognitive empathy, and according to Montemayor et al. (2022), this ‘synthetic empathy’ crosses a line. While users may feel they are being understood emotionally, the AI they are interacting with creates that experience through deception. In contrast, only humans have the capacity for emotional empathy and are motivated to help because they can share in the other’s emotions. Spotting a client’s positive reaction to good news in a planning meeting and sharing that emotion with them is uniquely human.
Emotional intelligence is a set of abilities that enhance our capacity to utilise all three kinds of empathy. The good news for next-generation planners is that these competencies can be developed. Research has linked emotional intelligence in financial planners to increased sales turnover (Enhelder, 2011), greater client retention (Woodfall, 2022) and increased client referrals (McCarthy, 2020). These findings demonstrate the power of emotional intelligence in the context of financial planning.
Partnering with AI
Future-proofing the financial planner role will mean seeing AI as an ally. The ‘empathic algorithms’ mentioned by Velagaleti et al. (2024) can interpret and respond to emotional cues. These tools could be a helpful supplement to human expertise. For example, an AI could notice signs of fear or anxiety in a client’s text-based communications, prompting a phone call from the financial planner to provide reassurance. However, the human financial planner will need the same knowledge of emotions, triggers, and their effects on behaviour that the AI is trained on. That requires the development of a high degree of emotional intelligence.
AI beats humans at data analysis, scenario modelling, and automating repetitive tasks, which frees planners to focus on building relationships and offering strategic guidance (Beck & Libert, 2017). According to research by Kinniry et al. (2016), advisers can add up to 2% per annum through behavioural coaching. By partnering with AI, the next generation of planners will be able to spot the signs that clients may be letting their emotions run their financial choices and influence actions aligned with their objectives. Investors strongly believe that human intervention is necessary for gauging their emotions, and robo-advice is a supplementary service rather than a replacement for financial planners (Bhatia et al., 2021).
The use of AI can help reduce financial planner bias. Even high emotional intelligence can bias the way planners perceive risk, influencing the choices they make on behalf of clients (Priolo et al., 2022). The recommendations may be biased to benefit the adviser (Gneezy et al., 2018). In the past, this reality has eroded trust with clients, and for some, digital alternatives that remove humans may be the solution they are looking for. That thinking may be logical but likely deprives clients of an opportunity for a deeper connection. AI assisting with the planning process, selection of products, and construction of investment portfolios can mitigate some of the issues that have long plagued the profession.
However, overreliance on the use of AI is risky. AI has an error rate of 13% in emotion detection (Velagaleti et al., 2024). Misidentifying emotions and providing an inappropriate response could have disastrous consequences for client relationships. Imagine an anxious client is mistakenly labelled angry; the AI response would be inappropriate and lead to the erosion of trust as the client feels misunderstood. In preliminary findings from Dr Cliff Lansley and the EIA Group, ChatGPT scored 54% on the e-Factor emotional intelligence assessment. AI scored little above chance compared to trained humans in empathy, reading emotions in others, and influencing. Financial planners who want to thrive in the future must do more than the technical elements of their role by developing and leveraging the EQ edge they have over AI.
Financial planners with high emotional intelligence need to remain the trusted human interface, complemented by AI tools.
What can New Planners do?
In order to continue to thrive, next-generation planners must develop a hybrid skill set that combines emotional intelligence abilities with technology proficiency. Here are some actionable steps:
· Develop Emotional Intelligence: Planners need to develop the capabilities that AI is being trained on. Understanding emotions, what triggers them, and how to respond is crucial to developing emotional intelligence. Recognising the signs of emotion in the client’s behaviour, such as facial expressions, voice, language, and nonverbal communication channels, will be critical.
· Embrace Empathy: AI may never be able to move past ‘synthetic empathy,’ so adopting empathy to understand clients and build human connections will remain the financial planner’s advantage. Emotional intelligence is required to understand clients’ emotional cues and accurately hypothesise about the triggers to form an appropriate response. The power of influence to guide clients towards solutions that meet the plan’s objectives will require emotional and compassionate empathy.
· Use AI Thoughtfully: AI insights may be highly beneficial for financial planners, assisting them in anticipating client’s needs and identifying opportunities for advice. Planners should embrace using robo-advice to supplement their service and increase efficiency. As clients’ demands and expectations change, some may want a hybrid of digital and human interactions. Be prepared to be the human interface, utilising emotional intelligence to meet the client’s non-financial needs.
· Invest in TeTechnology: High-quality setups for virtual meetings will enhance human connection. Professional audio and video equipment will be required to communicate effectively, maximising the opportunity to connect emotionally with clients.
The Future of Financial Planning
The role of financial planners will evolve further as AI becomes more sophisticated. Emerging technologies, such as embodied AI in the metaverse, may reshape how clients and planners interact, offering a highly immersive experience for financial education and planning.
While these advancements will change the role, much will stay the same. The human touch that planners provide to clients dealing with death, marriage, divorce, becoming a parent, starting a business, selling a business, changing careers, or retiring, will likely be irreplaceable. During these life stages, crises, and opportunities, clients seek the guidance only a trusted human adviser can provide. Planners must demonstrate high emotional intelligence to earn their clients’ trust.
Conclusion
Financial planning may be approaching a crossroads as AI and shifting client expectations shape the future. However, new planners have an opportunity to future-proof their role by focusing on developing unique human abilities, particularly emotional intelligence, which will remain the financial planner’s advantage.
The future belongs to those who can position themselves as the trusted human adviser, supported by technology that helps them deliver a highly efficient and deeply personal financial planning experience.
About the authors:
James Woodfall is a highly experienced former financial planner who, through his business Raise your EI, now works with financial services firms consulting on how they can use emotional intelligence to improve individual and company performance. Cliff Lansley is a Director of the Emotional Intelligence Academy and has worked with clients across the globe helping them to read, understand and influence others when it matters. Their new book The Heart of Finance is a practical toolkit enabling finance professionals to develop the Emotional Intelligence needed to build effective and profitable client relationships.
