A growing number of Americans are experiencing significant stress regarding their retirement prospects, with approximately seven out of ten individuals admitting to feelings of depression and anxiety linked to financial instability. This represents an 8% increase from the previous year, according to a recent study by Northwestern Mutual. Furthermore, over half of those surveyed express concern that their savings may not last throughout their retirement years.
This heightened financial apprehension is prompting many to seek guidance from various sources. Increasingly, Americans are utilizing both traditional financial advisors and modern digital tools, such as robo-advisors and AI-powered planning applications, to help them organize their retirement strategies. The younger generations, including Gen Z and Millennials, are particularly affected by this anxiety, with about 40% reporting weekly feelings of financial unease, a notable rise from 2023 figures.
There is clear evidence that professional financial assistance can be beneficial: three-quarters of individuals who work with a financial advisor describe their financial situation as "strong," in contrast to just 44% of those without an advisor. However, only about 27% of Americans currently engage with a traditional financial advisor, largely due to high fees and minimum balance requirements that make such services inaccessible to many. This accessibility gap is driving individuals to explore alternative solutions. A 2024 poll by Ipsos and BMO revealed that approximately 37% of Americans are already employing AI for various aspects of money management, including personal finance education, budgeting, and evaluating investment opportunities.
Despite the rising adoption of AI in financial management, trust remains a critical factor. Nearly two-thirds of respondents in the same survey indicated that AI is unable to comprehend the emotional nuances that influence financial decisions. These subtle emotional factors are especially crucial in long-term decisions like retirement planning. Consequently, while people are open to using algorithms for data analysis, they still desire human oversight to review financial plans and retain the flexibility to make adjustments or override AI-generated recommendations.
Even with the increasing prevalence of AI tools, the majority of Americans continue to place more trust in human advisors, particularly when it pertains to personal finances. In the Northwestern Mutual study, when asked about their preferred source for retirement planning advice, 56% favored human advisors, while only 13% opted for AI. However, a significant portion of respondents expressed a desire for a hybrid model: a human advisor who also leverages AI technology. This preference underscores the desire to combine the efficiency of AI with the personalized judgment and empathy that a human advisor can offer.
Digital financial tools have been available for over a decade, with robo-advisors like Betterment and Wealthfront offering cost-effective, algorithm-driven portfolio management. The recent advancement in generative AI tools, such as ChatGPT, has further expanded these capabilities, enabling systems to answer complex questions and simulate human-like conversations. Nevertheless, generative AI introduces new challenges. Unlike rule-based robo-advisors, AI chatbots can misinterpret context or provide confident but unsuitable advice that is not tailored to individual circumstances. For retirement planning, where decisions have long-term consequences, these risks are a serious concern.
This explains why, in terms of trusted financial information sources, 42% of households relied on their bank or credit union in the past year, compared to only about 3% using general AI chatbots or robo-advisor apps. A 2024 J.D. Power survey similarly found that only 27% of bank customers trust AI for financial advice, despite expecting it to simplify daily banking in the future. Ultimately, most individuals seek a balanced approach, valuing AI for its speed and analytical power, while relying on human advisors for discernment, reliability, and tailored guidance.
