Adviser-client relationships eroded by AI: Research

While there are elements of artificial intelligence (AI) that boost operational efficiency for financial advisers, a new study finds they are not fond of the idea of their clients seeking a second opinion through the technology, as it can be "insulting and signals disrespect".

The Offended by the algorithm: The hidden interpersonal costs of clients seeking AI second opinion research paper indicates financial advisers often feel offended when their clients use AI to obtain a second opinion and become less motivated to work with them.

The research, conducted by the Monash Business School, in collaboration with MUMA College of Business at the University of South Florida, notices rapid advances in AI have enabled the rise of AI-enabled advisory tools, which are beneficial, but they also introduce a "competitive pressure" for human advisers, fearful of being replaced.

Based on two case studies involving financial advice, advisers tend to perceive AI as inferior to themselves and perceive clients who consult an AI adviser as "less competent".

Research author associate professor Gerri Spassova said learning a client has sought AI advice decreases the adviser's motivation to work with that client.

Importantly, this effect persists even when clients use AI only for background information or as a complementary resource, Spassova said.

"Advisers view AI as substantially inferior to themselves; thus, being placed in the same category as an AI system feels insulting and signals disrespect, undermining advisers' willingness to engage," Spassova said.

"My intuition is that the situation will not get much better. Firstly, because professional advisers' jobs are on the line.

"Also, as AI gets better, it may threaten our sense of worth and self-regard, and so when clients defer to AI, it would prompt advisers to question the value of their human contribution."

To avoid a confrontational scenario, Spassova said it is better for clients not to disclose to their advisers that they've consulted AI.

"And this may be particularly true for new client-adviser relationships, where the client has no track record of doing business with the adviser and where trust may not have been established yet," Spassova said.

"The effect will probably be weaker if there is a long history of the client and the adviser working together (though even then the adviser may feel cheated)."