The financial capability of artificial intelligence platforms is improving to the extent that it will likely be able to replace human financial advisors in the future, according to finance experts.
However, AI has a major drawback relative to human advisors: a lack of fiduciary duty, they said. And a resolution to that legal gray area doesn’t seem near at hand, they said.
A fiduciary duty is a legal obligation that many financial advisors — and professionals in other fields, such as lawyers and doctors — owe their clients. It essentially means they will put their clients’ best interest ahead of their own.
“The problem that we have to solve is not whether AI has enough expertise,” said Andrew Lo, a finance professor and director of the Laboratory for Financial Engineering at the MIT Sloan School of Management. “The answer right now is, clearly, AI has the [financial] expertise.”
“What they don’t have is that fiduciary duty,” Lo said. “They don’t have the ability to suffer consequences if they make a mistake to the same degree that a human advisor does.”
