Using AI As A Financial Advisor

I’ve been using AI as a financial advisor and I have some stories to tell but I need to pace myself so let’s start with some a walk down ETF street.

I asked AI to help me review a list of ETFs and told it that I wanted to put these ETFs into one of three buckets.

• Bucket 1: Taxable Brokerage Account
• Bucket 2: Tax Deferred Account
• Bucket 3: Tax Free Account

I uploaded my ETF list to AI and this is the table it produced:

Suggested Bucket	ETF	Expense	Yield	Financials	Technology	Health Care	Industrials	Cons Defensive	Energy	Utilities	Cons Cyclical	Basic Material	Communication	Real Estate	Cash	Bonds	Government	Holdings
Bucket 1: Taxable Brokerage Account	LVHI	0.004	0.0635	0.2361	0.0162	0.0494	0.0461	0.0763	0.1386	0.1223	0.0913	0.0813	0.1112	0.0312				170
Bucket 1: Taxable Brokerage Account	URA	0.0069	0.0572		0.0102		0.175		0.7453	0.0146		0.0549			0.0007			55
Bucket 1: Taxable Brokerage Account	CGCP	0.0034	0.0514													0.2647	0.7353000000000001	1027
Bucket 1: Taxable Brokerage Account	XMHQ	0.0025	0.0502		0.155	0.0745	0.3378	0.0569	0.0422		0.1338	0.0847			0.0001			81
Bucket 1: Taxable Brokerage Account	GCOW	0.006	0.0458		0.0318	0.1734	0.113	0.14732	0.1917	0.0624	0.0601	0.0914	0.129		0.0007			105
Bucket 1: Taxable Brokerage Account	SCHD	0.0006	0.0348	0.1789	0.1044	0.159	0.1179	0.1394	0.1225	0.004	0.1108	0.0173	0.0492					103
Bucket 1: Taxable Brokerage Account	DGRO	0.0008	0.0221	0.1797	0.1793	0.1679	0.1148	0.1036	0.0811	0.0673	0.0662	0.0252	0.015		0.35			417
Bucket 1: Taxable Brokerage Account	FCEF	0.0329	0.0671	0.107	0.1199	0.2225	0.1037	0.0431	0.0987	0.1244	0.0431	0.0253	0.0536	0.0718		0.2907	0.085	56
Bucket 1: Taxable Brokerage Account	FDVV	0.0015	0.0274	0.0694	0.2553	0.0574	0.1571	0.111	0.0997	0.1077	0.0345		0.0154	0.0924	0.0095		0.0001	111
Bucket 2: Tax-Deferred Account	JEPQ	0.0035	0.0964	0.0069	0.5065	0.0642	0.0366	0.0573	0.0039	0.0128	0.136	0.012	0.1611	0.0027	0.0124	0.1597		99
Bucket 2: Tax-Deferred Account	HIGH	0.0051	0.0911														1.0	32
Bucket 2: Tax-Deferred Account	ISPY	0.0055	0.0787	0.126	0.3289	0.1146	0.0758	0.0579	0.0353	0.027	0.1019	0.0198	0.0901	0.0228				508
Bucket 2: Tax-Deferred Account	AMZA	0.0218	0.0735						0.9983	0.0017								52
Bucket 2: Tax-Deferred Account	JEPI	0.0035	0.0717	0.1154	0.2014	0.1479	0.1371	0.1028	0.0334	0.0601	0.0965	0.023	0.051	0.0315				137
Bucket 3: Tax-Free Account	COWZ	0.0049	0.0187		0.2056	0.0802	0.103	0.0776	0.2298		0.208	0.0515	0.0443		0.0002			103
Bucket 3: Tax-Free Account	DGRW	0.0028	0.0151	0.1173	0.3021	0.1641	0.1076	0.1038	0.0348	0.0019	0.0951	0.0183	0.0524	0.0025				299
Bucket 3: Tax-Free Account	CGDV	0.0033	0.0151	0.1074	0.1694	0.1537	0.2253	0.0727	0.0412	0.0349	0.0948	0.0433	0.0574		0.032			55
Bucket 3: Tax-Free Account	SPGP	0.0036	0.0137	0.1386	0.1948	0.0291	0.1264	0.0278	0.2382		0.1425	0.0813	0.0213		0.0003			78
Bucket 3: Tax-Free Account	OMFL	0.0029	0.0134	0.148	0.276	0.1105	0.1015	0.107	0.0106	0.009	0.1067	0.0193	0.1106	0.009	0.0001			253
Bucket 3: Tax-Free Account	MOAT	0.0047	0.0076	0.0918	0.1757	0.2143	0.213	0.1377			0.0569	0.0619	0.0488					55
Bucket 3: Tax-Free Account	FFLC	0.0038	0.007	0.1112	0.2986	0.1367	0.0966	0.0435	0.0543	0.0473	0.085	0.014	0.0978	0.015	0.0062			106
Bucket 3: Tax-Free Account	VONG	0.008	0.0063	0.0608	0.5056	0.0846	0.0347	0.0375	0.0041	0.0018	0.1333	0.0063	0.1255	0.0058				398
Bucket 3: Tax-Free Account	HELO	0.005	0.0053	0.1219	0.3347	0.1152	0.0795	0.0469	0.0359	0.0243	0.1168	0.0202	0.0829	0.0216				175
Bucket 3: Tax-Free Account	VUG	0.0004	0.0052	0.0571	0.5084	0.0762	0.0331	0.0227	0.0082	0.0012	0.1218	0.0176	0.1387	0.015				191
Bucket 3: Tax-Free Account	SPMO	0.0013	0.0047	0.2277	0.2238	0.1126	0.1028	0.068	0.0229	0.0188	0.119	0.0052	0.0898	0.0092	0.0002			101
Bucket 3: Tax-Free Account	FYLD	0.0059	0.0	0.2072	0.0526		0.1618	0.0397	0.2391	0.0101	0.0778	0.1539	0.0579					105

At first I was a bit unsure if some of these selections made sense but then I went back to read what it wrote and here is a quote:

Bucket 1: Taxable Brokerage Account
Suitable for ETFs with low yields or those where tax efficiency is already a priority, like ETFs that focus on capital appreciation rather than dividends. Low-turnover or tax-efficient funds are ideal for this bucket.

Bucket 2: Tax-Deferred Account
Suitable for ETFs generating higher income (e.g., dividend-focused, bond funds) because tax-deferred accounts allow you to delay paying taxes on gains and income until withdrawal.

Bucket 3: Tax-Free Account (e.g., Roth IRA)
Suitable for growth-oriented ETFs or those expected to appreciate significantly over time. Since withdrawals are tax-free, placing high-growth investments here maximizes the benefits.

Bucket 1: Taxable Brokerage Account: ETFs with moderate to low yields.
Bucket 2: Tax-Deferred Account: ETFs with higher yields.
Bucket 3: Tax-Free Account: ETFs with lower yields, focusing on growth potential.

The interesting thing is that I never mentioned growth as part of my objectives but AI suggested the ETFs with growth potential to be put into the Tax-Free Bucket and knew it is best suited for Roth IRA.

For the most part, AI aligned with what I was thinking about which ETF to put in what bucket so I think it did a great job. But what about diversification? I asked AI to check the diversification of the portfolio and here are the results:

Bucket 1: Taxable Brokerage Account:

This bucket has a relatively balanced allocation across various sectors. Significant exposures include:
Financials (15.4%)
Industrials (14.6%)
Energy (19%)
Health Care (12.9%)
Overall, this bucket looks reasonably diversified, although there is a slightly higher concentration in energy. You may want to monitor this sector’s volatility and adjust if necessary.

Bucket 2: Tax-Deferred Account:

This bucket shows a strong concentration in:
Technology (34.6%)
Energy (26.8%)
Other sectors like Financials, Industrials, and Health Care have smaller allocations. This bucket is somewhat concentrated in technology and energy, which may create higher risk in case of sector-specific downturns. Diversifying more into sectors like consumer or industrials could help reduce concentration risk.

Bucket 3: Tax-Free Account:

This bucket is well-diversified, with notable allocations in:
Technology (27.1%)
Financials (12.6%)
Health Care (11.6%)
The allocation is more evenly spread across sectors, making this bucket relatively diversified with no extreme concentrations. It seems well-positioned for growth and balance.

Summary:
Bucket 1: Balanced but slightly energy-heavy.
Bucket 2: Too concentrated in technology and energy. Diversification across more sectors is recommended.
Bucket 3: Well-diversified and balanced.

AI then asked if I was interested in suggestions for re-balancing this portfolio and I said yes so here are the results:

To optimize for growth and tax savings, I’ll suggest a rebalance based on two primary goals:

Growth Potential: Allocate more into sectors like technology, healthcare, and consumer discretionary, which historically have higher growth potential.
Tax Efficiency: Allocate higher-yield and less tax-efficient ETFs to tax-deferred accounts, and growth-oriented, tax-efficient ETFs to tax-free or taxable accounts.
Rebalance Recommendations
Bucket 1: Taxable Brokerage Account
This bucket is relatively balanced, but to optimize for tax efficiency, consider the following adjustments:

Reduce exposure to high-yielding sectors like Energy and Financials: These can be tax-inefficient and would be better suited for tax-deferred accounts.
Increase allocation to Technology and Healthcare: These sectors often focus on capital appreciation rather than high dividends, making them better suited for taxable accounts.
Rebalance Suggestion:

Move some ETFs with high energy or financial exposure (e.g., FCEF) to Bucket 2.
Increase exposure to ETFs like DGRW, CGDV, and SPGP, which are more growth-oriented with lower yields, making them tax-efficient.
Bucket 2: Tax-Deferred Account
This bucket is overly concentrated in Technology and Energy, which could be risky. To diversify:

Increase allocation to sectors like Industrials, Consumer Defensive, and Utilities: These sectors tend to provide stable dividends, making them suitable for tax-deferred accounts.
Reduce Technology exposure: Technology is growth-oriented and would perform better in a tax-free account for long-term growth.
Rebalance Suggestion:

Reduce exposure to ETFs heavily invested in technology (e.g., ISPY) and move them to Bucket 3.
Add more defensive ETFs or ones with stable dividends (e.g., ETFs like JEPI or LVHI) that are well-suited for tax-deferred growth.
Bucket 3: Tax-Free Account (Roth IRA)
This bucket is already well-diversified and should focus on growth-oriented sectors where capital gains will be tax-free.

Increase allocation to growth-focused ETFs in sectors like Technology, Healthcare, and Consumer Discretionary.
Move high-growth, low-yield ETFs from Bucket 2 into this bucket.
Rebalance Suggestion:

Add more exposure to ETFs like ISPY, OMFL, MOAT, and VUG from Bucket 2, which are focused on growth, making them ideal for tax-free growth.
Maintain the current diversified approach and ensure this bucket is focused on long-term appreciation.

General Allocation Summary:
Bucket 1: Taxable Brokerage Account:

Focus on low-yield ETFs (growth or capital appreciation)
Allocate ETFs like DGRW, SPGP, CGDV (low dividend, high growth potential)
Decrease exposure to Energy-heavy ETFs and move those to Bucket 2.

Bucket 2: Tax-Deferred Account:

Focus on high-yield ETFs and more stable, dividend-paying sectors
Allocate ETFs like JEPI, LVHI for dividends
Reduce heavy concentration in technology and growth sectors.

Bucket 3: Tax-Free Account:

Focus on growth-oriented ETFs that can appreciate tax-free
Allocate ETFs like ISPY, MOAT, VUG (high growth potential)
Move some technology-heavy ETFs from Bucket 2 to benefit from long-term, tax-free growth.
This approach should strike a balance between optimizing tax efficiency and maximizing growth potential.

I then took all the information and suggestions and asked AI to recreate the re-balanced portfolio in a table.

AI’s 3 Bucket Balanced ETF Portfolio

ETF	Yield	Suggested Bucket	Rebalanced Bucket
JEPQ	0.0964	Bucket 2: Tax-Deferred Account	Bucket 2: Tax-Deferred Account
HIGH	0.0911	Bucket 2: Tax-Deferred Account	Bucket 2: Tax-Deferred Account
ISPY	0.0787	Bucket 2: Tax-Deferred Account	Bucket 3: Tax-Free Account
AMZA	0.0735	Bucket 2: Tax-Deferred Account	Bucket 2: Tax-Deferred Account
JEPI	0.0717	Bucket 2: Tax-Deferred Account	Bucket 2: Tax-Deferred Account
LVHI	0.0635	Bucket 1: Taxable Brokerage Account	Bucket 2: Tax-Deferred Account
URA	0.0572	Bucket 1: Taxable Brokerage Account	Bucket 1: Taxable Brokerage Account
CGCP	0.0514	Bucket 1: Taxable Brokerage Account	Bucket 1: Taxable Brokerage Account
XMHQ	0.0502	Bucket 1: Taxable Brokerage Account	Bucket 1: Taxable Brokerage Account
GCOW	0.0458	Bucket 1: Taxable Brokerage Account	Bucket 1: Taxable Brokerage Account
SCHD	0.0348	Bucket 1: Taxable Brokerage Account	Bucket 1: Taxable Brokerage Account
DGRO	0.0221	Bucket 1: Taxable Brokerage Account	Bucket 1: Taxable Brokerage Account
COWZ	0.0187	Bucket 3: Tax-Free Account	Bucket 3: Tax-Free Account
DGRW	0.0151	Bucket 3: Tax-Free Account	Bucket 1: Taxable Brokerage Account
CGDV	0.0151	Bucket 3: Tax-Free Account	Bucket 1: Taxable Brokerage Account
SPGP	0.0137	Bucket 3: Tax-Free Account	Bucket 1: Taxable Brokerage Account
OMFL	0.0134	Bucket 3: Tax-Free Account	Bucket 3: Tax-Free Account
MOAT	0.0076	Bucket 3: Tax-Free Account	Bucket 3: Tax-Free Account
FFLC	0.007	Bucket 3: Tax-Free Account	Bucket 3: Tax-Free Account
VONG	0.0063	Bucket 3: Tax-Free Account	Bucket 3: Tax-Free Account
HELO	0.0053	Bucket 3: Tax-Free Account	Bucket 3: Tax-Free Account
VUG	0.0052	Bucket 3: Tax-Free Account	Bucket 3: Tax-Free Account
SPMO	0.0047	Bucket 3: Tax-Free Account	Bucket 3: Tax-Free Account
FYLD	0.0	Bucket 3: Tax-Free Account	Bucket 3: Tax-Free Account
FCEF	0.0671	Bucket 1: Taxable Brokerage Account	Bucket 2: Tax-Deferred Account
FDVV	0.0274	Bucket 1: Taxable Brokerage Account	Bucket 1: Taxable Brokerage Account

I’m a bit blown away. I accomplished all of this in minutes. It took minutes to do an almost an hour to create this post. No need to schedule an appointment with a financial advisor, spend an hour or two talking about ETFs or options or upselling. I didn’t have to spend a dime aside from my AI subscription fee which is well worth it. And always keep in mind that we are in the early stages of AI. This is like dial up modem internet from the 90s and AI is already doing amazing things!

Here is what I look forward to AI doing and specializing in:

1. CPA AI – Evaluate all of my financial activity and optimize taxes and go ahead and file them for me!
2. Financial Advisor AI – Optimize my investment portfolio.
3. Trader AI – Trade my account with emphasis on improving income via dividends, options, futures and capital appreciation.
4. Budget AI – Automatically streamline all my expenses and optimize retail spend for the lowest most efficient price.

Share The Wealth

Are you on the AI bandwagon yet? If not, what’s holding you back?