AI for financial planning: New tools to empower younger generations to save

As artificial intelligence continues to reshape the financial landscape, AI-driven wealth management tools are becoming essential, particularly for younger generations facing the Great Wealth Transfer – the hand-off of trillions of dollars from baby boomers to younger generations over the next 20 years.

We asked CJ Follini, a recognized expert in asset management and millennial wealth management and an adjunct professor at NYU with over 30 years of experience in finance. He also is chief investment officer of NOYACK Alternative Investments, managing over $1 billion in assets under management with diversified experience in asset management.

Noyack Wealth Club, Follini’s nonprofit foundation, has spent the last 2 ½ years building a Small Language Model (SLM) designed to be a personal wealth management copilot — not an advisor — specifically for the Great Wealth Transfer cohort of Millennials and Zillennials. Below, he offerrs a unique perspective on how AI can be harnessed to foster long-term financial empowerment for younger generations.

Q: What is the Great Wealth Transfer?

A: The Great Wealth Transfer refers to the unprecedented shift of approximately $38.4 trillion from baby boomers to younger generations, primarily millennials and Gen Z, expected to occur by 2045. This massive transfer of wealth is already underway, with millennials projected to inherit $4.4 trillion by 2025 alone. The transfer is expected to continue in increasing increments over the next two decades:

• 2021-2025: $4.4 trillion
• 2026-2030: $5.6 trillion
• 2031-2035: $7.5 trillion
• 2036-2040: $9.5 trillion
• 2041-2045: $11.4 trillion​

This shift is significantly impacting financial markets as younger investors take control of substantial assets. These generations are starting to invest earlier than their parents, with 31% of millennials beginning to invest before the age of 21, compared to only 9% of baby boomers. Moreover, millennials and Gen Z allocate 3x more to private investments compared to previous generations, showcasing a stronger inclination toward private markets​.

Q: How are AI-powered tools changing wealth management?

A: AI-powered tools are transforming wealth management by automating tasks, enhancing personalization, and democratizing access to sophisticated financial advice. These tools analyze vast amounts of data to provide tailored investment strategies that meet the specific needs and goals of individual investors.

Millennials and Gen Z, who are generally more comfortable with technology, are especially drawn to AI-driven platforms for managing their wealth. These tools allow them to navigate complex private markets, improve their financial literacy, and independently manage their investments in ways that were previously only accessible to high-net-worth individuals​​.

Q: What are the benefits and challenges of using AI for wealth management?

The benefits:

• Personalization: AI offers highly personalized financial strategies based on an individual’s goals, behavior, and real-time market data, ensuring recommendations are dynamic and tailored.
• Efficiency: By automating routine tasks, AI improves efficiency, reduces human error, and accelerates decision-making, helping users manage their portfolios more effectively.
• Democratized access: AI provides sophisticated financial services that were once reserved for the ultra-wealthy to a broader audience, allowing more people to access wealth management tools.

The challenges:

• Complexity: AI-driven financial tools can be intimidating or difficult for less tech-savvy users, requiring better educational support.
• Trust issues: Some investors are hesitant to fully trust AI systems, especially for major financial decisions, as they still value human oversight and relationship-building.
• Privacy concerns: AI platforms often require access to sensitive financial data, raising concerns about data security and privacy protection​​.

Q: How are millennials and Gen Z using AI for financial literacy?

Millennials and Gen Z are leveraging AI-powered apps and platforms to enhance their financial literacy and develop smarter investment strategies. Prediction: this demographic will have the largest ratio percentage of self-directed wealth management in history by the year 2027. AI-driven Personal Wealth Manager co-pilots, like the one developed by weareNOYACK.com, and robo-advisors offering automated financial planners help them:

• Track spending
• Learn investment basics
• Build diversified portfolios
• Access personalized insights and tutorials on financial concepts

Many young investors appreciate the educational resources offered by these platforms, which deliver personalized insights and make financial decision-making more engaging. AI aligns well with their digital-native tendencies, making financial education more accessible and less daunting​​.

Q: What’s the future of AI-enhanced wealth management?

While AI is transforming the wealth management landscape, it is unlikely to completely replace human financial advisors. Instead, the future of wealth management is expected to involve a hybrid model where AI complements and enhances the capabilities of human advisors.

AI excels at automating data analysis, routine tasks, and providing personalized portfolio management. However, human advisors remain essential for addressing complex financial situations and offering the relational and emotional insights that AI cannot replicate. Advisors will focus on building relationships, handling more intricate scenarios, and providing holistic financial planning, while AI manages the data-driven aspects​.

The future of AI-enhanced wealth management lies in creating an even more seamless and personalized user experience. AI tools are expected to become more sophisticated, with the ability to:

• Predict market movements more accurately
• Rebalance portfolios in real-time
• Provide hyper-personalized financial education

Related: Young generations look to AI for financial edge, but trust humans for the big decisions

This will make wealth management more intuitive and accessible, especially for underserved populations such as younger investors or those new to private markets. As AI improves, we may also see enhanced natural language processing capabilities, enabling more intuitive interactions between users and their AI financial advisors through voice commands or real-time chat​​.

Q:  How is AI helping with 401(k) plan administration?

A: AI is increasingly being used to assist employers and plan sponsors in administering 401(k) plans. These AI tools can:

• Streamline plan management
• Optimize enrollment processes
• Provide personalized recommendations to employees based on their financial situations and retirement goals

For employers, AI helps analyze participation rates, identify trends, and suggest ways to improve engagement, while automating much of the paperwork involved in plan administration. For employees, AI offers tailored advice on contribution rates, investment allocations, and retirement readiness. By leveraging AI in 401(k) plans, both employers and employees benefit from enhanced efficiency and personalized support​.