Can AI Replace a Financial Advisor? Kyle Ray Says Complexity Changes the Answer

Artificial intelligence can answer financial questions in seconds, and low-cost investment funds have made it easier than ever to invest without professional help. But Kyle Ray says access to information is not the same thing as having a financial plan — especially once taxes, retirement accounts, real estate, business ownership, and major life decisions begin overlapping.

“AI tools and low-cost investment funds have made it easier than ever for people to handle parts of financial planning and investing on their own,” said Ray, M.S. Financial Planning, founder and wealth manager of Peachtree City-based Ridgeback Wealth Management. “So the question is no longer just, ‘Can I DIY?’ It’s, ‘Where does a human advisor still add value, and when does that value matter most?’”

For Ray, that value becomes clearer as a person’s financial life grows more complicated.

A family may have 401(k)s, IRAs, inherited IRAs, health savings accounts, 529 college savings plans, real estate, or a privately held business. They may also be weighing a career change, early retirement, stock options, an inheritance, or another major life transition.

Each decision may look manageable on its own. The challenge is understanding how one choice affects all the others.

That is why Ray draws a distinction between choosing investments and comprehensive financial planning.

One common criticism of financial advisors, he said, can be summed up by the phrase “S&P 500 and chill” — the idea that most people can simply put their money into a low-cost index fund and leave it alone.

“I do not really object to that,” Ray said. “Simple portfolios are fine. They can sometimes be improved at the margins, but not everyone wants or needs more complexity.”

But choosing a fund is asset management, and asset management is only one part of a financial plan.

Clients may also need to determine how much to save, which types of accounts to use, when and how to spend those assets, how taxes affect those decisions, and how all those choices fit their broader goals.

“Asset management and financial planning are separate services, but I believe they are most valuable when they work together,” Ray said.

For Ray, that also changes how the value of a financial advisor should be measured.

“A fiduciary advisor should not be judged primarily by whether they beat an index, but by whether they act in the client’s best interest and help the client make informed decisions across the full financial picture,” he said.

Advice that isn’t tied to gathering assets

Ridgeback’s compensation model is part of that philosophy.

The firm does provide investment management, and clients can give Ray authority to manage investment accounts held through Charles Schwab. But unlike the traditional assets-under-management, or AUM, model, Ridgeback does not calculate its fee as a percentage of the value of those accounts. The firm generally charges a flat annual fee for ongoing financial planning and wealth management.

That means Ray’s compensation does not increase simply because a client moves more money into an account he manages.

The distinction can become particularly important when much of a family’s wealth exists somewhere other than a brokerage account.

A business owner may have spent decades building a company. Another client may own rental houses, commercial property, farmland, or other real estate. Those assets can be central to a family’s financial future even though they never become part of a traditional managed investment portfolio.

Ray’s role, then, can include helping clients think through whether those assets still make sense, how they may provide income in retirement, what risks they carry, how taxes affect future decisions, and whether they should eventually be held, sold, transferred, or handled another way.

In a previous interview with The Citizen, Ray gave the example of a client who came to him after a divorce owning several pieces of real estate. His financial incentive was not to persuade her to sell the properties and move the proceeds into accounts he could manage.

“Honestly, if the properties make sense, if we looked at the risks and we looked at the potential returns and the rents, and maybe they fit your preference, if you just really like real estate or you really want to be hands-on with it, then great,” Ray said at the time.

That same principle can apply to entrepreneurs who prefer putting capital back into their businesses or families whose wealth is concentrated in other assets.

Ridgeback says its flat-fee structure is designed to minimize compensation-related conflicts and allow advice to extend across assets held elsewhere, including retirement accounts, real estate, and other investments. For Ray, the objective is not gathering the largest possible pool of assets to manage. It is understanding what the client owns and helping that client make decisions about the whole picture.

Where AI fits — and where it can fall short

Ray does not dismiss AI as a financial resource.

Someone whose income is rising might use it to begin researching Roth IRA eligibility. A homeowner preparing to sell might use it to look into the capital gains exclusion on a home sale. AI can help explain a concept or point users toward sources they can independently verify.

But Ray sees an important limitation when people turn to AI for more complicated planning decisions.

“One risk of using AI to solve complex financial planning questions is that you do not know what you do not know,” Ray said.

AI is particularly good at producing clean, understandable rules of thumb. That can also make those rules seem more universally applicable than they really are.

Retirement planning offers one example.

The widely known “4% rule” provides a framework for thinking about retirement withdrawals. Ray considers the research behind it an important contribution to retirement planning, but not a substitute for determining what spending strategy fits a particular family.

“The research behind it is an important contribution to retirement planning, but that does not mean it is the spending policy that will maximize every family’s goal or outcome,” he said.

There is another potential problem: AI may help reinforce a conclusion the user already wants to believe.

Ray points to dividend investing as an example. Many investors assume a growing dividend means a better investment, while decades of financial research have explored investors’ persistent preference for dividends — commonly known as the “dividend puzzle.”

“The danger is that AI can give you a convincing defense of your existing beliefs, whether that is the 4% rule, dividend stocks, or the latest ETF trend, instead of helping you question whether those beliefs are right for your situation,” Ray said.

That is where Ray believes the human element of financial planning becomes important.

“In many cases, the value of an advisor is not having access to better information than AI,” he said. “It is knowing which questions need to be asked, recognizing tradeoffs that are not obvious, and helping clients avoid becoming overly confident in simple answers to complex problems.”

Not everyone needs an ongoing relationship with a financial advisor. Employer 401(k)s and other workplace retirement plans can be a strong starting point, with reasonable default investments and, in some cases, educational resources or professional guidance.

Ridgeback also does not require clients to turn over investments for management. The firm offers financial-planning-only relationships for people who prefer to implement recommendations themselves, and it does not require a minimum level of assets to become a planning client.

But as assets, taxes, retirement decisions, businesses, real estate, and family goals begin intersecting, Ray believes the job becomes less about finding the answer to one financial question and more about understanding which questions need to be asked in the first place.

And even people who have the knowledge and ability to do that work themselves may decide they would rather spend their time elsewhere.

“And for many people, even if they can do the analysis themselves, they would rather spend their time with family, pursuing hobbies, advancing their careers, or enjoying retirement than constantly thinking about taxes, investments, and financial decisions,” Ray said. “That is where a trusted financial advisor can provide real value.”

To learn more about Ridgeback Wealth Management or schedule a consultation, visit ridgebackwealth.com.