Executive Summary
AI's increasing development and integration in the workplace presents many opportunities for increased efficiency and production – and, with that efficiency, the potential for significant disruption to those working in highly-automatable industries. As these changes accelerate, many clients may begin to fear not just job displacement, but full-blown career obsolescence. Unlike a temporary market downturn, this type of uncertainty can feel more existential, raising difficult questions about professional identity and long-term viability.
In the 170th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore how financial advisors can support clients whose careers may be disrupted by the rise of artificial intelligence. While AI may or may not reach the level of job elimination that some fear, it does represent an irreducible uncertainty – a risk that can't be fully defined or planned around, especially in fields such as law and software engineering. And when faced with such irreducible uncertainty, the most effective approach is not necessarily to aim for detailed prediction, but instead to focus on simplification, adaptability, and resilience. In this context, planning shifts from optimizing for known risks to preparing for unknown disruptions.
One core strategy is to simplify wherever possible – reducing discretionary spending, trimming financial commitments, increasing liquidity, and revisiting allocation choices with a focus on flexibility rather than long-term growth. For example, instead of maximizing tax efficiency through pre-tax retirement contributions, clients may choose to allocate more toward savings vehicles that can be accessed without penalties if needed. Shifting to more conservative, liquid investments can also create optionality to fund retraining, bridge career transitions, or launch entirely new ventures in less automatable fields. Similarly, clients concerned about AI-related disruption may opt to delay large purchases until there's more clarity around how their industry will be affected.
Helping clients navigate AI-related disruption reinforces the advisor's role not only as a financial expert but also as a trusted thinking partner. Clients facing career instability – or even a loss of professional identity – need space to voice their concerns and explore potential paths forward. Often, simple questions like, "What might happen next?" or "How would we need to prepare for that?" can open up space for meaningful reflection and reveal tangible next steps. In this way, advisors can help clients balance long-term uncertainty with shorter-term action – anchoring their sense of agency when outcomes remain unclear.
Ultimately, the key point is that it's difficult to predict how AI will reshape specific career fields. For clients whose livelihoods may be at risk, advisors can work collaboratively to create an individualized, practical plan to reduce the financial strain of potential career disruption. That kind of planning can offer clients substantive peace of mind, ensuring that they understand their options amidst an ever-changing landscape – all while giving the advisor a chance to reaffirm their value in a rapidly evolving world!
Authors:
***Editor's Note: Can't get enough of Kitces & Carl? Neither can we, which is why we've released it as a podcast as well! Check it out on all the usual podcast platforms, including Apple Podcasts (iTunes), Spotify, and YouTube Music.
Show Notes:
Kitces & Carl Transcript
Michael: Well, greetings, Carl.
Carl: Hello, Michael Ernest Kitces, the seventh.
Michael: First.
Carl: The first, that's right, the first. The one and only.
Michael: Who else can have a name as crazy as this?
Carl: The one and only. That's right.
Michael: The one and only. That's how I got the domain name. Actually, it was a problem because my father actually squatted the domain name before me, and I had to go get it from him 20-something years ago. He was kind enough to let me have it, so that was good.
Carl: Wow, very nice. We shouldn't spend very much time on this, but I had carl.com in my shopping cart for $10,000. And I couldn't...
Michael: Actually, that's not bad.
Carl: I know. I know. At the time, I was like...
Michael: If you are inclined to spend on premium domain names, that's really not bad.
Carl: No, I was, "There's no way, I cannot do that. There's no way, I cannot do that." I just looked. Something like I think it's iamcarl or carl.co is for sale for $95,000. Carl.com is way...you know what I mean? So, anyway. Come to me for day trading advice.
Michael: That would be your single greatest investment if you could have scooped every other Carl on the planet...
Carl: That's right.
Michael: ...by getting the domain name. See, now I'm just wondering, who's got michael.com, and how's that going for them?
Carl: Come to me for day trading advice.
What Risks Could AI Pose To Professional Career Fields? [01:31]
Michael: So, last episode, we talked a bit about all these dynamics of what does and doesn't change in our advice business as AI kind of rolls through. What are the skills that persist? What becomes more important? What becomes less important? So we had a great follow-on comment from one of our wonderful listeners. Yes, when you email us with comments and things you want us to talk about, we really do listen to them and act on them. So we had this great comment that came in that I'm curious for your thoughts kind of extending this theme further. So here is what was written in:
"With all the comments about evolution of AI over the next couple of years, I agree with you guys, I don't believe my job as a financial planner is at stake. But I'm very concerned that a material percentage of my clients are going to be laid off as AI eliminates jobs faster than the marketplace can add new ones. And if my clients don't have jobs, they don't have money to pay for financial planning. They likely need to draw on retirement funds in order to survive. How do you think through this concern?"
Maybe if you'll grant us that advisors will be okay, it doesn't mean all consumers will be okay. It doesn't mean all clients will be okay. If you believe any of the theme that AI seems to be coming for a lot of proverbial white collar work, the reality is advisors disproportionately serve white collar clients, because they tend to have higher incomes, more ability to pay for financial planning fees, more disposable dollars to save into retirement accounts and accumulate wealth, all the things that fit financial planning models well. So, what happens if we're okay, but clients start getting impacted? Do you think this spans everything from how do you plan to how do you talk to them about it?
Carl: Yeah. We can get specific if we need to, but I kind of like the idea of backing up just a little. And again, I like the idea that you just held one assumption constant so we don't have to deal with it. We're holding the assumption constant, but we don't... We had a whole conversation about this. We're not sure we know or we agree that all financial planning jobs are safe. But we're going to set that aside. I think backing up a little bit to...because I've been really, really surprised. No, not surprised. It's been interesting to me how many conversations I've had recently with really smart...these are author friends. In fact, one of them, she's an executive coach and, honestly, maybe one of the most emotionally...Ph.D. from Harvard, super smart, one of the smartest people I know. Her name is Jennifer, an executive coach to some really senior people. And she was telling me... And her specialty is making mission-critical decisions in the face of irreducible uncertainty, so you've gotten to the point where you've done everything.
Michael: Mission-critical decisions...
Carl: In the face.
Michael: ...in the face of irreducible uncertainty. So she makes really big, hard decisions when no one actually knows the answer.
Carl: That's exactly right. You've gotten rid of all the reducible, right? You've ensured things you've got... You're left with this pile. I always think risk is what's left over after you think you've thought of everything. So you've already thought of everything. You still got this pile. And so you're just, "It's such a hard time right now." And so I think this question may be pointing to that of, how do we give advice? How do we help people plan? The word plan in an environment where I don't think there's any debate. Maybe there's some debate to be had, but I don't think there's any debate. It's more uncertain than I ever remember. I'm not saying bad, by the way. I'm just saying uncertain.
Michael: Yeah. I would certainly grant uncertain. I'm still in the camp that I think the actual wake of job destruction is going to be less severe than a lot have made it out to be. But, A) I can certainly grant there's really wide error bars on that, not academically. There is a very wide range of uncertainty around that prediction and how wrong it can still be if things maybe compound a little bit further than I think they're going to go. And so, in that spirit, yes, there's just a very literal, almost palpable level of uncertainty. "I don't think... No, Mr. and Mrs. Client, I don't think your entire careers are going to be rendered moot by AI in three years. And I really can't say that with total certainty." I really can't. I really can't.
Carl: Right. Well, remember, AI is just one teeny piece of the uncertainty, right? And again, holding politics neutral, I would say this is a very uncertain time in the global economy, trade, tariffs. Staying neutral about politics, it's pretty uncertain.
Michael: To me, there is something, I don't know. There is something more existential around the AI threat and the conversations than, frankly, any of the other things you just mentioned that are all the things that we otherwise have to deal with with clients in dealing with uncertainty. Half of the markets are uncertain because I don't know how the tariffs are going to turn out, and I don't know what the legislation is going to be, and I don't know how the midterm elections are going to go next year. And even if I knew all that stuff, I'm not actually certain how much of this price the market versus not, and whether that will make the market go up or down. There's a range of uncertainty that we always deal with in helping the clients navigate around these combinations of the economy, which can impact their portfolios and their jobs if they're still of working age or their businesses if they're business owners. There's always been a layer of that that we have to deal with forever. We make up to try to handle some of the contingencies.
And that's still fundamentally different than, "But maybe in three years, AI does literally my entire job, and there's no recovery for me." At least recessions have recovery. Market declines climb back. Economies reshape themselves to some extent. I can't work for my old company, but I went and worked for their competitor that navigated the economic thing successfully. That's really different from, "Yeah, I had a chosen career and vocation, I've been doing it for a decade or two, and it just literally got obliterated by AI. The whole thing doesn't exist anymore. My whole job doesn't exist." And that could happen in relatively few years. Even if you are skeptical about how much that comes, the fact that it's even on the table is just a whole other level of dynamics around, I think, both fear in the face of that kind of uncertainty, that kind of extreme uncertainty, and some very real questions, per our advisor friend who wrote in.
What do you do with that? How do you actually plan for that? What conversations or planning strategies do you think about for clients in those situations beyond, "Well, the reason we do annual financial planning is that if life changes and the world goes sideways on you, we'll sit down for our annual review meeting and start planning?" I feel like sometimes we've got a little bit of that as, "Yes, we do that, and it's really important." And sometimes it feels like a small bit of a cop out for, "Okay, but can we actually plan for some contingencies and not just say, 'We'll be here by your side, and when the crazy AI things happen, we'll navigate this together.'"
Carl: Yeah. Yeah. No, I agree. I was simply pointing to the fact that, layered on top of, so you just got this mix. And of course, the AI thing is the thing. And so then you're back to normal questions, which are, is this time different? We have all the warnings against asking that kind of a question, the last four words or whatever, of any great investor this time. It's different.
Resilience-Focused Planning For Clients Facing Career Viability Risk [10:50]
Michael: Is that question different to you when we're talking about technological threats as opposed to market threats?
Carl: Yeah. I think that's the question we're asking, is what does...? So, okay. So one side of the planning equation would be, what do we do if you lose your income? The other side of the planning equation would be, what do we do with the plan, the investment plan, and anything else, the cash flow plan? What impact does that have? It feels to me, when I'm in uncertain terrain, I have a natural tendency to fly to simplicity, a flight to simplicity, to find simpler terrain, to make things simpler somehow. And so I look at my job, okay, and the three-year, five-year projection of what I may or may not do. As you pointed out, the boundary conditions are kind of unknown. You got people, smart, legitimate people that should be listened to, saying it's going to obliterate this whole thing. And then you got other smart, legitimate people saying it's not going to be that big of a deal. So we just got this huge amount of uncertainty.
So I don't know what to do with that because I can't make that a lot simpler. So then I say, "Okay, well, what else could I make simpler? What else could I make...?" I'm not quite sure I want to say more conservative, but how could I get simpler? And then we can talk about the emotional piece. This is the question we're really asking. How can I make myself generally more resilient? Because there's no specific event. Event-specific resilience is what we're really good at. We call it risk management. And we do that by looking at the event that just happened and go, "Okay, let's prepare for that event to happen again." But this is a new event. They always are new. The real risk is the thing we haven't thought of, and this is one of the things we may or may not have thought of.
So, how do we make ourselves generally more resilient to that kind of a shock? And so we start by saying, "Okay, what happens with the income loss? What could happen? What could we do there?" And so, what kind of conversations do you have around there? You start exploring. You start brainstorming.
Michael: I do feel like it is very income-centric. Not to be totally blasé about very real dynamics, but you highlighted, there's implications for your income plan. There's implications for your investment plan. Obviously, this is a gross oversimplification. But if you're really worried that AI companies are going to put everything out of business, buy some AI stocks. Own a diversified portfolio that includes the companies that benefit when AI goes well as they kill the companies that lose to AI and bless the economic system and the aggregate. That's why indexing works broadly, and owning the market carries that in proportion to what it's going to do. If you are actively inclined, you can go find yourself AI companies that you believe are going to be the particular winners in this outcome, either because you're betting on AI or you want to buy some high-flying AI stocks because you're hoping they actually go broke. But at least if they go big, they'll cover the fact that you lost your job.
So, again, I'm obviously oversimplifying some investment dynamics, but it just feels, on the investment side, I actually know ways to invest around this because companies that lose lose market share to companies that win. And if I've got an investment portfolio, I can invest in those. It's the income part. It's the job part. I've trained my life and career to do this thing. And now, apparently, no one will pay me for it anymore because AI is doing it. Again, that's both the scary part and, I feel like, dare I say, the more impactful part and the harder part to plan around. In that vein, from a pure financial planning sense, and I guess, to some extent, a business owner sense, what do I do with that? I accumulate cash.
Strategies To Prepare Clients For A Potential Career Transition [15:31]
Carl: Maybe this would be helpful. Let's get really specific. Let's pretend... we do not know. I do not know. I'm just going to pretend. One of the things that I'm hearing most about is software engineers, or we could pick on lawyers. Lawyers are more fun to pick on, so let's pick on lawyers. You hear a lot about software engineering, lawyer, law. Those are two areas that people are, "Oh, this is going to be eaten by AI." Let's pretend that's true. You've got a client who's an attorney. He's 45, height of his career. She's a partner at a law firm. And they're actually pretty convinced, "I can see this happening. This is going to be a problem." Now, whether it will or not, a whole 'nother, we don't know. It's the whole point of uncertainty. What do you do with those people? There's a whole conversation to be had about the emotional side of this, which I do want to make sure we save a little bit of time to talk about. But what do you do with somebody who's actually, "Okay?"
I don't want to over-index on lawyers. So let's also do...I have a friend who's a software engineer, who's always been independent, runs his own programming company. And he's always had nine or ten clients at one time. He's always been so busy. Right now, he has three, and those are wrapping up. And he's literally, "I do not know what I'm going to do." And he's 47. What do you do?
Michael: My gut response comes in sort of two flavors. Number one, I need cash. Just, I need liquid dollars to weather the storm, if I'm going to have to go learn another career, learn another industry, adapt, redo my software engineering business to something that's software-adjacent enough that I can use some of my marketable skills. I also know how to run a business. So, apparently, I'm going to wind down my software engineering business, and I'm going to run a local HVAC business, because according to "The Wall Street Journal," those are great businesses, and people make a lot of money. And AI is not automating your physical HVAC installation anytime soon.
Carl: Right, right.
Michael: Okay, I can take my business owner skills and business owner in a new place. I can take my lawyer skills, which, beyond lawyering, is a lot of critical thinking and analysis, and maybe find some adjacent places to do that. Frankly, if you're a good lawyer, critical thinker, relates to their clients, well, I hear financial planning is going to do fine even if lawyers get knocked out. So maybe we'll solve our industry talent shortage because all the lawyers that get knocked out of the legal business will come and be financial planners. But lightheartedness aside, cash and some planning about what, or at least some thinking, some exploration of what industries or paths or careers might I explore if this doesn't work out? For your examples of folks that are in their 40s, as someone that's in my late 40s, "old dog, new tricks" gets a little hard.
If I got to figure this out because AI obliterated my world, human beings are remarkably adaptive, I will find a thing. I will figure it out. But I sure won't necessarily make what I've been making in the past anytime soon. At best, I'm starting over in a new industry and world, and I may have some time period of zero or negative income while I'm getting my new thing started. I got to invest in a new business to launch. I got to invest in a training or education in a new career to get a new career going. And so, okay, if the bad thing happens, it's going to be a few years of you having much lower income while you try to do whatever you can to bring any kind of income in and learn and retrain towards a new industry. How do I bridge that? The answer is cash or at least things I can readily convert to cash, which, slightly more practically speaking, do I need to dial down the risk in your portfolio and own heavier fixed income allocations? Because I need more stuff that I can sell liquid if the AI bad things start happening, and all of a sudden, you're saying, "My income is about to drop like a rock, and I'm going to have to go to a new industry."
Do I think about not contributing so much to retirement accounts where I may have tax penalties to get the dollars out and put more after-tax into a boring high-yield savings account, put my interest coupon for the next two or three years? Because I might slightly under-earn the long-term return in stocks. But I need cash available to navigate my career income much more than I need to get the particular average return in the stock market for the next two or three years, which may or may not be the average returns anyways. Because returns are uncertain. This is not investment advice.
Carl: I agree. I don't think it's much different – well, I should be careful with that phrasing. But tactically, what you do when uncertainty ratchets up, you look for ways to make things simpler and get to simpler ground, safer ground. And so, if a client comes to you, one of the things that's tricky here, just thinking about this, is we've got to keep our opinions or feelings or fears off clients' plans. So if you've got a fear that the whole world is coming to an end, well, that's one thing. But if a client comes to you and says, "Man, I've always had nine gigs going. I have three, and all three of them have told me they're not going to renew. I don't know what's going to happen in seven months," okay, well, now we know what to do here. We say, "Okay, well, how can we reduce burn?" That's getting to safer ground. Can we reduce burn? Can we increase safety in terms of making things simpler on the investments we own, in terms of, like what you're mentioning, cash? If things got dramatic and we decide, "You know what, I've had it anyway..." Because I was thinking this the other day. Actually, I was talking to the guy that does the neighbor's landscaping, because I had a question, because I was, "Hey, how do I fix this problem?" And he was telling me that he can't hire anyone. He can't find anybody. He's offering kids $40 an hour to do landscaping.
Michael: Good Lord.
Carl: I know. And I was, "You're so busy." And he was, "Yeah, I have endless jobs. And I'm saying no. Nine times out of ten, I'm saying no." I was, "Man, I actually found myself as I do." My family always makes fun of me. I came inside, and I was, "I think I might start a landscaping business." So let's say you decide you want to go do that. Well, then you've got other questions. How is real estate done? Is there something you could trim back on housing expenses? Are you going to have to retool your whole career and you're going to start a business? Well, you do starting business things, right? Reduce burn, have cash, find a way to make things simpler. Those are the kind of conversations I think you have, you know what I mean? It's not. The only thing that's different here is the level of existential threat that is in the air, at least, the perception, at least. That's the only thing that's different. This isn't much different from somebody who got laid off unexpectedly years ago. It's kind of the same policy, the same process.
Michael: But I do feel like it is powerful to reflect on just things that are so common for clients in a wealth accumulation perspective that I feel like it is a moment of double think to say, "Well, what if we intentionally make your portfolio more conservative and dial back on your retirement contributions?" Because I feel like most of us spend a lot of our careers trying to get people to contribute more to their retirement accounts...
Carl: Can I interrupt you just for a minute?
Michael: ...and get comfortable with risk in the markets that...
Carl: Let me interrupt you just for a second. Just don't lose where you were. I just want to make sure we highlight. You're not actually saying that because you have a fear of the market. You're saying that because of the life plan, the cash flow plan. I just want to make sure that's clear as you're talking.
Michael: Yeah, I know. Because I may need to fend off a one or multi-year period where your income is reduced. And those turn out not to be retirement assets. Those turn out to be AI-driven career transition assets, in which case, it sucks if you would have to sell things when markets also happen to get volatile through this tumultuous AI event that maybe turns out to occur. And so I need to be able to liquidate things without having the risk that I'm liquidating when they're down. And I'd rather not have to pull them out of accounts that assess penalties on said distributions as well.
Carl: That's exactly right. And I think you're right. And again, we should just emphasize here, it's really easy to talk about being punched in the face. It's a completely different experience when you're actually the one being punched in the face. And so, with clients, this is "Hey, this is hard. And you know what, let's get through it." Do you know what I mean? And I often think about this throughput. When you're navigating complex adaptive terrain and it's uncertain, all you're really doing is getting...there's only one way to navigate it. You get really clear about where you are today, and you solve for the next local optimum. That's from literature. So, where am I today? And basically, that means take the next step.
Well, when volatility moves up, and when we're talking about volatility, it could be market volatility, but we're mainly here talking about career, life, culture, economy volatility, when that ratchets up, the throughput of that cycle speeds up, the throughput of the "Where am I today? What's the next step? Where am I today? What's the next step?" In normal environments, with your retirement client, Social Security and a pension, that's once a year. In this case, it may be, "Hey, you know what, why don't you do a little research on this? Call me tomorrow. Hey, let's get back together next month when you find that out."
I think that's the other thing, from a planning technique perspective, you have in your head, is, "Oh, I'm moving into complex terrain, and volatility has moved up a bit. I'm going to need to be...this is kind of the Super Bowl for me. I'm going to need to be here." And I'm going to also be saying to the client, "Hey, don't worry. Don't worry about that. Okay, let's do some projection. Two to three years from now, let's really think about this for a minute. Okay, great. Set that aside. What do you do tomorrow? Great. Go research that. Okay, cool. How about I'll call this?" You know what I mean? You really...
Navigating Volatility Conversations In Real-Time With Clients [27:04]
Michael: Let me slow you down there for a moment because I think that's actually the other thing I wanted to ask you about before we wrap up here. How are you navigating this conversation with a client who's going to be saying, "Carl, I'm really freaking out. I think AI is going to eliminate my job, my company, my whole industry, right? I had nine job orders. It's down to three. It's soon to be zero. I'm freaking out, and I don't know what to do. You're my financial planner. It's your chance to become a hero," right?
Carl: The very first thing I do is I tell anybody on my team that's listening, "Hey, would you clear the schedule for the next hour?" I just make sure I have time.
Michael: Okay.
Carl: If this was a phone call, I say, "Hey, this sounds really important. Would it be better if this was a meeting where I had time?" So, anyway, I just want to make sure I have time. So if it's a phone call, an unexpected phone call, you're...so same process with scary markets, right? Greet with empathy, "I got you. I can hear you. It sounds like, yeah, when I read the news right now, I get really nervous, too. Let's talk. Would it be better? What if we schedule a time? I can be free this afternoon for 90 minutes. Do you want to come in, or do you want me to call you?" Whatever. Then the very first thing I do is say, "Tell me about it. What have you thought of? Tell me when you first started feeling this way. What did you read, or what have you read that you're...?"
So I'm trying to get the client to understand, "Okay, first of all, I'm listening to you. How does it feel?" I'm not sure I'm asking, "How does it feel?" I'm probably just trying to demonstrate that. And I'm saying, and then I'm really...believe me, they've thought of answers. So the more you can say, "Gosh, I can see why this would be scary," and I do this with my kids, I'll just pause and kind of think for a second and just be, "Gosh, what have you thought of? Well, geez, I could do this, or maybe it won't be as bad. Oh, gosh, maybe it won't be as bad. Okay, that's interesting. I'd probably write that down."
I've always wanted to...I actually do my own landscaping. I'd be, "Oh, wow, so you've actually considered landscaping?" "Yeah." So write that down. I would do what you would do in a coaching session and then be, "Okay, well, geez," and I would literally say, "Gosh, what do you think we should do next?" I really want to get the client involved. Now, if the client is, "Look, totally, I have no idea," "I wonder if we ought to just...one thing we could do here is... Do you think it would be reasonable to make things a little simpler financially? Are there any commitments?" Because this is the one thing we didn't mention that I would be sure to bring up. "Are there any commitments that you're about to make that you could hit pause on? Were you thinking about buying a new car? Have you guys been looking for a vacation home?" We just got a new dog. "Have you been thinking about getting a new dog?" Hold.
And I would get down granularly, too. "Let me take some time. We'll look at the cash flow. Are there subscriptions that can be canceled? How could we get ourselves a little simpler, a little safer, a little clearer?" And then I would just work our way up that ladder we already talked about. "Okay, let's look at the investments. Could we tweak some things around the edges? Do you think it's time for that yet, or are we still exploring?" Those are the kind of questions I would be asking.
Michael: Okay. Thank you. That's helpful.
Carl: Yeah.
Michael: That's helpful.
Carl: Yeah. I have deep empathy for this. I'm having these conversations, and it's so palpable for me, too. I've got a daughter in med school who's coming to me almost every day, saying, "I don't know what this is going to look like ." She's really good at kind of surfing uncertainty. She has been her whole life. It's kind of an adventure, but it's easy to see how...
Michael: So the apple doesn't fall far from the tree.
Carl: It's really scary, too. And so I think we just have to have deep empathy for this, independent of our own feelings. We've got to have deep empathy for other people going through it.
Michael: Amen. Amen.
Carl: Cheers.
Michael: Thank you, Carl.
Carl: Thanks, again. Talk to you soon, Michael.
Michael: You, too.
