Artificial Intelligence in Finance: Knowledge vs. Wisdom

Artificial Intelligence in Finance_ Knowledge vs. Wisdom

Remember when Artificial Intelligence (AI) was only a dream on the silver screen?  We watched in fascination and fear as Hollywood told the story of how AI might change the landscape of our world – robot vs. human, organic vs. machine.  While we knew AI would become a reality one day, for years it remained hidden beneath the surface of public awareness… until now. 

With the recent explosion of AI technology platforms made available to the public, AI is quickly making a profound impact on the way we live and work, including the role of a Wealth Advisor.  While this technological innovation is sure to revolutionize traditional finance practices, it still poses questions about its long-term effects and implications. To gain clarity, let’s look at what AI can provide compared to its human counterpart; specifically understanding the difference between knowledge and wisdom.

Knowledge vs. Wisdom

While many may use knowledge and wisdom interchangeably, it’s important to understand that these two terms are quite different from each other and play different roles in our daily lives.  Knowledge is the accumulation of facts, data, and information.  Wisdom is the ability to apply knowledge in a meaningful way; it’s gained through experience and reflection. Knowledge is important in our daily lives, but wisdom is crucial in making important decisions. Like your financial plan, knowledge may give you the numbers and information you need to create a plan, but wisdom is what gives you the insight and judgment to make the best decisions for your financial future. It’s important to understand the difference between the two terms and appreciate the value they both bring to living your best financial life.

Value Of AI In Finance (Knowledge)

Quickly Analyze Large Amounts of Data: AI’s most significant advantage is its capability to manage and analyze massive volumes of data with a speed and accuracy that no human could possibly achieve. It can evaluate the performance of different investment options, predict future market trends based on historical data, and provide quantitative risk assessments.

Sophisticated Algorithms & Machine Learning: AI-powered financial advisor platforms use sophisticated algorithms and machine learning to suggest portfolio adjustments, alert users about market fluctuations, and provide a detailed analysis of financial health. This can be a game-changer for individuals who lack the time or expertise to navigate the complexities of financial markets.

Value Of Human Wealth Advisors (Wisdom)

Understands the emotions behind investing: The financial world is not just about numbers; it also heavily involves emotions. Making financial decisions can be stressful, and during periods of market volatility, a human Wealth Advisor can provide emotional support and assurance that AI simply cannot.

Applies a personal touch to investing: While AI can learn from new data and improve over time, its decision-making process is still largely devoid of those innate human qualities and traits- empathy toward others we care for, insights derived from years of experience in the field, understanding the nuances of the market, and the ability to make instinctive decisions during uncertain scenarios.   

Knows you and adapts to your life changing circumstances: Human Wealth Advisors can look beyond the numbers to understand your unique life situation, incorporating factors like career changes, family circumstances, and personal beliefs into their advice. They can provide guidance and empathetic support in the event of unexpected life changes, market downturns, or economic crises.

While AI might lack wisdom, it certainly has its place in the world of financial advising. It can work as a powerful tool for human Wealth Advisors, helping them to leverage vast amounts of data and automate certain tasks.  This allows human Wealth Advisors to focus on developing deeper relationships with their clients and provide them with the space to apply their wisdom where it really counts.

In conclusion, the debate between knowledge and wisdom in the context of AI as a Wealth Advisor isn’t about choosing one over the other. Instead, it’s about recognizing the unique strengths of both and creating a harmonious partnership that allows for the most robust financial advising possible. AI and human Wealth Advisors can work together to provide a service that combines the best of both worlds – the speed, accuracy, and analytical power of AI with the empathy, intuition, and wisdom of a human Wealth Advisor.

LSIA is here for you to help address your financial questions. CLICK HERE to contact us.

Data Source:  This blog was written with the assistance of Artificial Intelligence, specifically Chat GPT and Jasper.  Photo courtesy of Adobe Stock.

LS Investment Advisors, LLC (dba LSIA) is a registered investment adviser.  The information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.  Past performance is not indicative of future performance.  Importantly, while AI is a powerful tool that offers many benefits, there are also inherent risks associated with the current technology, including misinformation, which must be considered.  It’s imperative to always check the accuracy of the AI platform’s data and always ensure that you’re not infringing on the rights of others, including intellectual property and privacy rights.