AI Alert: Replacement Peril To
Personal Financial Planning Practitioners: An Antidote
By Jim (Yaakov) Schwartz,
retired fee only personal financial planner
Co-founder of NAPFA
Confirmation bias and denial (de-NILE?) aside, AI is a replacement peril to personal financial planners - in particular those planners compensated by a percentage of assets under management (AUM) - who in reality are first and foremost asset managers secondarily personal financial planners (regardless of protests to the contrary) explicitly or implicitly sell ‘more, more, more.’
More, more, more personal financial planners (aka more-ons) even if giving lip service to ‘life planning’ are forgetting the historical lessons of financial product and services ‘commodization’ and its effect on compensation.
In the ‘60’s 10 shares of Union Pacific bought thru Newberger & Co in Philly - had a $40 commission. Today, one can buy $1,000,000 of Union Pacific at zero or $7 commission. Mutual funds have decreased sales commissions for 8.5% to 5% then to no loads and 12b fees to now exchange traded funds which can be bought without sales commissions have even lower management fees. And commoditization of compensation is now occurring and will continue to narrow compensation in residential real estate commissions despite the efforts of the real estate residential real estate business lobby to keep the holy grail of the 2.8% to the buyer agent and the 5-6% to sales commission today are seeing this crumble - after successful lawsuits aimed at price (commission) fixing.
AI will accelerate commoditization in personal finance and therefore reduce of personal financial planning compensation (especially AUM) and even planners and their compensation.
Yes, there is and will be denial aka ‘we’re doing life planning.’ Really? If all you know is a hammer - everything looks like a nail. If the planning compensation is a percentage of assets under management - then the focus - the hammering will be on asset accumulation. The result has been despite nodding & selling the financial planning process systemically making step children out of: asset protection (income replacement due to disability, reduction of capital depletion due to long term care, liability etc etc), asset conservation (income adequacy for heirs, asset disposition according to desires etc) let alone aligning meaning with means etc as behavior is a function of its consequences (assets under management).
AI can, will, and probably is starting already to impact - asset management.
A personal observation of over 50 years involved with personal financial planning - 20 years in practice and over 50 years writing on the subject in particular on ENOUGH (sm), Enough vs More, and the so called life planning in personal financial planning. The personal financial life planning - is lip service at best - and at worst really “yakedy yak yadda yadda- let me be your best friend and keep my percentage of assets under management without reduction”
(Note I was not compensated on the basis of assets under management as it is inconsistent with the concept of ENOUGH(sm) - another story).
More, more, more - what are we all morticians
e.e. cummings
What is ‘an’ answer to offset the inevitable commodization and narrowing of compensation in personal financial planning (and financial planners) due to the further accelerant of AI, morticians?
Man has a will to meaning
Viktor Frankel
Meaning.
Meaning ‘to count’ the soul of the matter.
Specifically “aligning meaning with means - the soul of the matter - healing personal financial anxiety, puttin’ money in its place to transcend, elevate, connect, and align to one’s assignment (task) significance (meaning/calling) - what one was meant to do meant to be ‘enough’ to live on, enough to live for.”
Yes, there will the retort - one has to get ‘the means first’ which it just so happens requires more to get enough. But then when asked to define what is enough in the means first context the answer is some variation of ‘a little more.’ The reality is the Sam Levinson refrain, ‘I finally got the means to the end and they moved the ends apart.’
When there is ‘the why’ - ‘the how’ is enabled.
Any jackass can kick down a barn door,
it takes a carpenter to build one (2)
former Speaker of the House Sam Rayburn
There are two editions (1992, 1995) of the ENOUGH™ process. However, attached from my recently published guidebook God Sent YOU! Judaism On Purpose™ has 30 years later updates on ENOUGH™ (it’s the next to last module in Judaism On Purpose™ ‘aligning meaning with means’ and delineated towards the end in the appendix of the guidebook.
The update includes the critical MASTER FORM which is: actionable, interactive, accountable, measurable for the reader to use (as well as his or her spouse) with their financial advisor as well as for the financial advisors - that was not in the first two editions of ENOUGH™. The MASTER FORM creates a living history/the memory of the personalized financial planning when utilized per each personalized life planned personal financial goal/objective.
Also, in God Sent YOU! Judaism On Purpose™ are two other crucial modules adaptable to a personal financial planning approach that concretize ‘the soul of the matter’: Remember Me (The Soul Resume - After Life Insurance) and The Ethical Will.
The result of the Soul Resume is one’s mission ‘the IS’ (as well as what the mission IS NOT - ((without both the ‘IS’ and ‘IS NOT’ one gets Snot))). There is systemic prioritizing one’s values, etc using even Blue Ocean analysis and Kepner Tregoe potential problem analysis - to get to one’s ‘calling - assignment, meaning’ for action.
The Ethical Will outline provided is particularly useful for and in dealing with estate lawyers - relative to not just what is passed on monetarily but what is passed along in values - beliefs for heirs - giving guideposts.
Aligning meaning with means - the soul of the matter - knowing Who counts & what ‘matters’- elevating transcending aligning connecting to one’s assignment/significance - actionable, accountable - this AI cannot compete with. (At least not yet!)
See attached from God Sent YOU! Judaism On Purpose™ the ENOUGH™ Aligning Meaning with Means To Count! Module appendix write up (“The Playbook”).
A One minute video on God Sent YOU! Judaism On Purpose™:
https://www.youtube.com/watch?v=dUgLEXfAsNM
(again not just for Wondering, Wandering, Withering Jews
but also for Curious Christians)
Note: I am not a Rabbi nor do I play one on tv.
(1) The Judaism On Purpose™ method is easily adaptable to Christians. In the context of God Sent YOU! while the workbook (by ‘the very very last Jew’ who should have designed it, it’s not just for W3 Jews (Wandering, Wondering & Withering Jews - 40%+++ which consider themselves Jewish religious ‘nones’ but also curious Christians (of which as well over 40% now consider themselves religious ‘nones’ (not nuns!)
(2) 1962 coming home with my all A’s & B’s and but 1 C report card from Beeber Junior High in Philly -- my mom’s first response was ‘how come the ‘C,’ Jimmy?’ ‘It was in woodshop, mom,’ replied. To which mom said, ‘that’s okay, we’re not carpenters anymore.’
