These Aren’t the Droids You’re Looking For

It’s a curious observation that in the world of financial planning, much like many other professions, there’s a regular decade-ly hysteria about whether the next generation of technology might do away with this financial planning business altogether. Before I was in the planning business, it was the idea that non-levelized commissions would drive the brokerages out of business. With the advent of self-directed trading online, it was the idea that online trading platforms and later, phone apps, would get rid of brokers altogether. Then it was the advent of robo-advisors and automated investing platforms; surely those would drive out financial planners.

Now the latest edition of this regular every-ten-years phenomenon is AI. Yesterday, I was cold-emailed a pitch deck for an AI-based wealth management platform. Last month a client sent me an email about an AI claiming to have passed the CFP® Exam (a claim quickly retracted on their marketing when the CFP Board kindly sent them a cease and desist for lying about an AI taking the CFP® Exam). And even going back a year or two, the new presence of LLMs has become the latest bugga-boo of putting financial advisors out of business. Nevermind that they hallucinate constantly and only score 1% better on financial literacy tests than the general public (37% AI vs. 36% average American).

The news this morning brings up another example of how one of the biggest “death of advisors” platforms is now quietly going away. Charles Schwab famously announced a robo-advisor/CFP® Professional hybrid offering a couple of years ago, providing those with $25,000 to invest and willing to pay $30/month with both an automated portfolio and access to a call center staffed by financial planners. That same offering is now being quietly closed down, the latest in a long line of “discount planning” offerings from major firms to shutter.

So what are we to make of the every-generation claim that technology will disintermediate the business of financial planners? How do we reconcile this with the studies that show that we’ll be short 100,000 financial planners nationally by 2034? And what does it say about financial planning that despite all the world’s best calculators and algorithms, robot after robot finds itself on the scrap heap while the business of financial planning continues to grow by double-digits year over year? This week, we’re exploring that it’s less the money and math keeping financial planners in business than it is the human element.

Differences in Expectations

Vanguard has done a terrific study over the past few years, trying to match up the expectations of those who use robo-advisors and digital tools to self-manage or outsource at low-cost, and those who work with human advisors. One of the key differences is both in the client’s belief about what a robo advisor can deliver and what a human advisor can deliver in terms of investment results, but also a staggeringly different perception of their own skills as investors. Those clients of human advisors typically anticipate they can earn 10%, while those clients of robo advisors typically anticipate that they can earn 21%. While those who invest aggressively might hope to attain annual returns of 10% over the long term, an annualized return of 21% would put the average Joe-digital investor in the same performance category as Warren Buffett (who has famously enjoyed an average return of 22% investing through and managing Berkshire Hathaway).

Yet, there’s also a gap in their expectations about results. The incredibly overconfident digital client thinks they can use a robo-advisor to attain a 24% annual return, or a 3% premium. The humbler client of a human advisor thinks that a human financial planner can deliver 5% better average returns. Ironically, they’re both wrong, but for different reasons.

The robo advisor cannot deliver a 3% premium over the performance of their human client, nor can they reasonably deliver a 24% return, let alone a 21% return, or even a mid-to-high-teens-percent return. While the market occasionally delivers 20%+ years, that is not a typical or consistent performance. The best-performing index of the past decade is the Nasdaq Composite, which has returned an average 15.2% return (to date as of 12/16/2025). So the belief by the average robo client has been that they are personally a better investor than the aggregated performance of the most aggressive tech-heavy index in the stock market, and in turn, even the human advisor’s clients believe that their advisor will match the performance of that aggressive index (while somehow still also diversifying their portfolio, managing risk and risk tolerance expectations, and the many other things that reduce negative outcomes at the cost of reducing the upside potential).

The human advisor cannot deliver a 5% premium over the performance of their human client either, and a 15% return is just as unreasonable. What study after study has shown over the years is that there is no professional investment manager that can reliably deliver excess returns. However, the financial planners are exceptional at closing the gap between the possible or probable return on personal finances (whether by investment returns or reduction of taxes) and the financial returns the average person experiences, which can often be less than half that of their potential.

So what is the result of that gross mismatch in expectations? Well, no one is happy. Or at least, no one starts off with their expectations being met unless they enjoy one coincidentally excellent year to start, likely followed by a less impressive year, if only to then become dissatisfied by the lack of consistent delivery of unrealistic expectations. It’s then only the client of the human financial planner who can at least have a conversation about it, both in setting expectations but also in explaining where unrealistic expectations are never going to come to pass by anything other than sheer luck.

The Business of Fiduciary Advice is Incompatible with Low Cost

There’s a classic business triangle: Fast, Cheap, Good. Pick two (at best). The promise of robo-offerings and the low-cost hybrid solutions like the Charles Schwab program is that you can somehow enjoy all three. Pay well below market rates for investment management and professional financial advice, and somehow enjoy personally bespoke financial planning advice in a timely manner, all within that wrapper of an incredibly reasonable if not downright bargain-bin price.

Yet, the economics of the engagement simply don’t lend themselves to that equation. We’ve written in the past about the misalignment of firm and talent expectations, but the same issues arise when consumers are seeking great services at low prices. The most recent research on associate financial planner compensation suggests that associate financial planners with less than 2 years of experience (e.g., pre-CFP® Professionals) earn an average salary of $73,750; and those in the 2-5 years of experience range with the CFP® earn an average of $88,847 as base compensation. Add on payroll taxes (7.65%) plus health insurance and other common benefits (call it another $12,000), and you’re looking at spending between $91,391.87/year on staffing an inexperienced financial advisor or $107,643.79/year on a moderately experienced financial advisor.

Even if you assume those professionals are 100% efficient and never take a day off all year long, there’s now a business problem. Assume every customer coming into the Charles Schwab-style robo-advisor hybrid program that just shut down is at the minimum of $25,000 invested, $300 up front, and $30/month after. Assuming a 1% Schwab Product yield on the investment portfolio ($250/year), you’re looking at $910 in the first year and $550 every year after. While studies show that the average new financial planning client takes about 33 hours to onboard and serve in the first year and 22 in the second and subsequent years, just to afford that inexperienced associate advisor, they’re going to need at least 100 brand new clients paying full freight from day one to pay for the professional. Account for the professional services industry norm that direct staffing costs should be about 50% of your costs, and they’ll need 200 clients; and skip past the first year to the second year, where the yield is $550 instead of $910, and they’ll need 333 clients. Back that all into a year where this professional never takes a day off, and they’ll only have 6 hours of the requisite 22 needed annually on average to serve clients. God forbid they ask for a raise, promotion, or take a sick day, or staff someone who has more than zero experience and thus demands higher wages. And bonuses? Heavens no.

Or take the example of Facet Wealth, a venture-capital-backed RIA in Baltimore. While they have made an impact on the marketplace for financial planning by eschewing typical assets under management fees and offering a flat-fee model, they’ve struggled to deliver. A casual perusal of their customer reviews or their internal employee reviews tells the story of a firm overloading employees, underdelivering on service level expectations for clients, and somehow trying to match both sides of a coin where the cost of services is less than the demand said pricing places on their staff to deliver services. We can certainly hope they’ll succeed in the long-term mission and vision, but it appears to have been rocky thus far.

So, functionally, the only way someone can receive competent, comprehensive, and timely advice from a financial planning firm is that they pay the premium required for it. In fee-only financial planning practices, this presents as “high” prices transparently shared on their websites or in their service agreements. In fee-based firms, this is often obfuscated through competitive planning or investment management fees, but is often made up on the back end by commissions, revenue sharing, and proprietary product revenue. But ultimately, for anyone receiving comprehensive and competent financial planning services, they’re paying the premiums required to obtain that service, plain and simple.

These Aren’t the Droids You’re Looking For

I don’t blame anyone for wanting to find a panacea. It would be wonderful if high-quality financial education and professional services were readily accessible. But even for the user of a free AI tool that presents a convincing and well-argued narrative answer to a financial question, there comes a fundamental issue: Do you trust it to be right, and if it’s wrong, who do you have to blame?

Technology has made financial planning more efficient and accessible over the years. That has helped with fee compression and margins, but more than anything, it has enabled financial planning firms to either maintain more comfortable lifestyle practices or grow into serving more clients with greater depth. However you look at it though, there is no free lunch. The business triangle reigns supreme: Fast, Cheap, Good. Decide which one you can live without.