Executive Summary
This case study examines the efficiency, quality, and comprehensiveness of retirement financial plans generated for Jeff and Susan Matthews by both a human financial advisor and HIVE’s AI financial planning assistant. The findings reveal that the AI assistant not only produced a personalized financial plan in a fraction of the time but also recommended a broader and deeper range of action items compared to its human counterpart. However, the financial plan generated by the human financial advisor is more precise and personalized than the one generated by the AI assistant. These results highlight the potential of AI in delivering effective and efficient financial planning services, emphasizing its role in modernizing financial advisory services to better meet client needs.
Client Case
Jeff and Susan Matthews are a middle-aged couple navigating the complexities of retirement planning amidst unexpected career changes. Jeff, a 62-year-old sales consultant, faced a sudden shift towards mandatory retirement due to layoffs at his company. Susan, a 57-year-old nurse practitioner, continued her career. Having never engaged with a financial advisor previously, the couple sought professional guidance. They wanted to secure their financial future, especially after Jeff’s job loss impacted their retirement plans.
Methodology
Financial Synergies Wealth Advisors helped Jeff and Susan (the clients) establish a financial plan and posted this sample financial plan on their business website.
We input the client’s information into the HIVE AI Financial Planning Assistant’s questionnaire. A comprehensive and personalized financial plan was crafted by the AI assistant.
This case study compares the retirement plans generated by Financial Synergies Wealth Advisors human advisor and the Hive AI assistant. The comparison metrics include:
- Efficiency, measured by the time taken to generate the plan.
- Quality 1: Precision and personalization, assessed by the accuracy of the information, technical knowledge and relevance of the action plans to client’s situations.
- Quality 2: Comprehensiveness, assessed by the number of action items recommended as well as their breadth and depth to achieve the client’s goals.
Data was collected through direct application of both methods to Matthews’s financial planning scenario, with the AI assistant processing the same client information via structured questionnaires.
Case Study Analysis
This section presents a detailed comparison of the financial planning process and the recommended action plans by both the human advisor and the AI assistant for Jeff and Susan Matthews.
1. Financial Planning Process
| Step | Human Advisor Process | Hive AI Assistant Process |
|---|---|---|
| Information Gathering | – Discovery Meeting: Initial consultation to understand financial goals and situation.- Client Engagement: Formal agreement and account setup.- Financial Plan Fact-Finding: In-depth review of finances, goals, and concerns. | Utilized a structured online questionnaire, completed by clients in their own time, taking only minutes (for this case study, HIVE’s internal team filled out the questionnaire). |
| Analysis & Planning | – Manual analysis of financial data, including net worth, income, expenses, insurance, and estate planning.- Financial Plan Presentation: Detailed recommendations and review of investment philosophy. | LLM based AI assistant generated a comprehensive plan within 3 minutes. |
| Plan Presentation | – Presentation of the financial plan in a meeting, with discussions on recommendations and next steps.- Implementation & Monitoring: Begins the process of implementing the financial plan. | Generated a detailed financial plan available for immediate online review by the financial advisor. Financial advisor can work with assistant on various tasks such as what if scenario etc. |
2. Action Plans Recommended
| Component | Human Advisor Recommendations | HIVE AI Recommendations | Additional Details from HIVE AI |
|---|---|---|---|
| Investment Planning | Consolidate retirement accounts, invest cash, lower cost annuity option, retirement account rollovers. | Cash for debt reduction vs. investment; diversified investment plan; evaluating social security withdrawal timing | 1. Given the client specific situations, a balance approach is recommended; 2. a detailed analysis for startup cost; 3. Short-term, low risk investment vehicle |
| Retirement Planning | Pursue consulting, delay Social Security, Medicare enrollment, manage cash for startup and emergencies, general tax strategies | Consolidating retirement accounts, evaluating social security withdrawal timing, analyze healthcare needs and costs | Human Advisor recommends delay Social Security vs. AI recommends further analysis of different scenarios including retirement age and income sources |
| Estate Planning | Update wills, set up POAs, beneficiary info update, referral to estate planning firm | Comprehensive estate planning, update documents, consider a trust | Recommend a comprehensive evaluation that identifies opportunities for tax saving, such as employing strategies for basis step-up at death or considering the conversion of traditional retirement accounts to Roth IRAs. |
| General Tax Planning | Entity setup for consulting business, vehicle tax implications, quarterly tax payments | Consult CPA for best entity type, track business income/expenses, SEP IRA account | Recommend an LLC for Jeff’s new consulting business; recommend purchasing the new vehicle under his consulting business. |
| Insurance Recommendations | No new term life insurance, maintain LTC insurance, purchase umbrella policy, insurance firm referral | Review insurance coverage versus needs, adjust life insurance coverage as necessary, investigate long-term care insurance options. |
Comparison Analysis
- Efficiency: The AI assistant markedly outperforms the human advisor in efficiency. It takes the AI financial planning assistant 3 minutes to analyze the client’s data and generate a comprehensive plan.
- Quality 1: Precision and Personalization: Action plans generated by the human financial advisor appear more precise and specific to Jeff and Susan Matthews’ situation. Human advisors often leverage their experience, understanding of client nuances, and the ability to interpret subtle cues and preferences that may not be explicitly stated. This allows them to tailor their recommendations closely to the unique circumstances, goals, and concerns of each client. For instance, suggesting a lower-cost annuity option and purchasing an umbrella liability policy are specific actions that directly address Matthews’ financial situation and risk management needs. Both were missed by the AI assistant. AI-generated action plans, while comprehensive and efficient, can sometimes seem more general.
- Quality 2: Comprehensiveness: While both approaches offer high-quality plans, the AI assistant provides a more comprehensive strategy by considering additional areas and scenarios possibly overlooked by human advisors. This is evidenced by the AI recommending a greater total number of action plans and more detailed analysis.
Conclusion
The comparative case study of retirement planning for the Matthews underscores the significant value of AI assistants in the financial planning process. The strength of AI lies in efficiency, the ability to analyze large data sets, and providing a broad overview of viable financial strategies.
AI can process vast amounts of data to identify trends, opportunities, and risks. However, capturing the depth of human insight and the personal touch that comes from years of experience and relationship-building can be challenging.
A hybrid approach of a human advisor and an AI assistant can enhance the financial planning process, ensuring that plans are not only efficient and data-driven but also deeply aligned with individual client needs, preferences, and life situations.
Resources
- Sample Financial Plan used in the case study
- Financial plan generated by HIVE’s AI Financial Planning Assistant