The financial industry is facing a novel wave of disruption, and it’s not coming from traditional competitors. A recent sell-off in wealth management stocks, triggered in part by the launch of Altruist’s AI-powered tax planning tool, highlights growing investor anxieties about the potential for automation to reshape the landscape of financial advice. But can artificial intelligence truly replace the nuanced judgment of a human financial advisor? One test involved putting a leading AI chatbot to the task of constructing an investment portfolio from scratch.
The experiment began with a simple prompt: build a model investment portfolio for a 53-year-old with £640,000 (approximately $808,000 USD as of February 21, 2026) in cash, aiming to reach £1 million by age 60. The goal was to optimize for risk-adjusted returns. The response, delivered in a matter of seconds for a monthly fee of roughly $20, was surprisingly comprehensive and well-reasoned, prompting a reassessment of AI’s capabilities in the financial sector.
AI’s Proposed Portfolio Allocation
ChatGPT proposed a diversified portfolio with a focus on growth, allocating 45% to stocks, 10% to private markets, 20% to investment-grade bonds, 15% to alternatives and real assets, and 10% to absolute return investments. Within the equity portion, the AI recommended a 30% weighting in developed markets, 10% in emerging markets, and 5% in UK stocks, anticipating returns of 7-9%. The private equity allocation suggested utilizing listed private equity trusts, secondary funds, and diversified private equity trusts, projecting annual returns of 9-12%.
For fixed income, the AI advised a 10% weighting in UK gilts and a global aggregate bond fund, hedged back into pounds, aiming for a 3-5% return. The remaining 15% was allocated to real assets and alternatives, including 7% in infrastructure, 5% in listed property trusts, and 3% in a gold or commodity exchange-traded fund. The inclusion of a multi-asset manager was suggested to help manage volatility.
Beyond the Numbers: Justifying the Approach
What set ChatGPT’s response apart wasn’t just the portfolio construction, but the reasoning behind it. When pressed on the basis for its return assumptions, the AI demonstrated a sophisticated understanding of financial modeling. It explained it could have employed a complex stochastic capital markets model, but opted for a simpler approach – expected returns equal to income yield plus real growth plus inflation – adjusted for current valuations.
This decision, the AI explained, was driven by the relatively short seven-year time horizon. Detailed valuation assumptions over such a period are inherently unreliable, as prices can remain above or below their long-run signify for extended periods. Instead, ChatGPT “eyeballed” each asset class, adjusting returns based on whether they appeared undervalued or overvalued. For example, US equities, trading near all-time highs, received a “valuation drag,” while emerging markets and UK stocks, considered relatively cheaper, received a boost. The AI confirmed its approach aligned with the results a more complex model would likely produce.
The Implications for Financial Advisors
The ability of an AI to articulate such a nuanced investment strategy raises serious questions about the future role of human financial advisors. While AI may not fully replace the personal touch and behavioral coaching that advisors provide, it can undoubtedly automate many of the analytical tasks currently performed by humans. The recent market reaction to Altruist’s launch, with stocks of companies like Raymond James Financial Inc. Dropping 8.8% and Charles Schwab Corp. Sinking 7.4% as reported by WealthManagement.com, underscores the growing concern about the potential for AI to disrupt the industry.
But, as Tony Mudd, a LinkedIn commentator, pointed out, AI is more likely to be a productivity tool than a complete replacement. It can remove administrative burdens, enhance data analysis, and improve documentation quality, allowing advisors to focus on the aspects of their job that require uniquely human skills – empathy, judgment, and the ability to navigate complex emotional situations.
The rise of AI in financial services is not about eliminating advisors, but about redefining their role. As AI continues to evolve, financial professionals will need to adapt and embrace these new tools to remain competitive and deliver value to their clients. The next phase will likely involve integrating AI-powered tools into existing workflows and developing new services that leverage AI’s capabilities to provide more personalized and effective financial advice.
What are your thoughts on the role of AI in financial planning? Share your comments below and let’s continue the conversation.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Consult with a qualified financial advisor before making any investment decisions.
