Animal Spirits Podcast: "Will AI Displace Financial Advisors?" (EP. 455)

Date: March 11, 2026
Hosts: Michael Batnick & Ben Carlson
Live from Miami – Special Guests: Michael Kitces & Phil Hughes

Episode Overview

In this lively, forward-looking episode, Michael and Ben dive headfirst into two of the biggest themes currently shaking the world of finance: the disruptive potential of AI on financial advisors, and the controversy swirling around the private credit market. Featuring industry experts Michael Kitces (on the “AI vs. advisor” debate) and Phil Hughes (private credit deep dive), plus a friendly roast battle, this episode is a blend of insight, candid debate, and signature Animal Spirits humor.

Key Discussion Points & Insights

1. Market Turbulence and Resilience

[00:46–03:56]

• The hosts recap wild swings in oil and S&P futures the night before, noting how quickly panic can turn to calm.
• The ability of markets to "take so much" is likened to Rocky Balboa:

  “It's like Rocky IV… This market is made of iron.” — Ben Carlson [03:47]

• Despite little time for traditional market talk in this live episode, both underscore that tumult continues to create anxiety, but the “market keeps rebounding.”
• Observations about after-hours volatility and buyers stepping in to stabilize markets.

2. Will AI Replace Financial Advisors?

With Guest: Michael Kitces
[05:09–22:09]

Listener Email & Existential AI Fears

• A listener email lays out the core concern about comprehensive AI replacing advisors by being more thorough, always available, and able to customize instantly:

  “Financial advice seems like the perfect prey for AI to take over almost immediately.” — Listener Email [07:26]

• Michael Batnick recounts Ben’s prior “existential freakout” (hot sweats!) over this topic.

The Hosts’ Evolving Views

• Ben’s perspective: DIY-ers have always existed—those who value their time or lack technical proficiency will still pay for human advisors.
• Michael’s addition:

  “Wealthy people aren’t going to trust robots… that’s where I’ve fallen on this.” [09:26]

Michael Kitces: Tech Hype vs. Industry Reality

• Kitces pushes back hard on “AI as existential threat.”

  “There’s always been do-it-yourselfers. They don’t hire us. They never hire us.” — Michael Kitces [10:23]

• The real bottleneck in advisory firms is not technical minutia but managing people and relationships—roles AI may not take over.

Historical Context: Tech Evolves, Roles Shift

• Kitces recounts the long arc of advisory jobs:
  • 25 years ago, 3 advisors required 8 support staff for filing, statement collection, mail sorting, etc.
  • Today, tech has replaced those tasks, but overall firm expenses and margins stayed the same.
• “Betty’s job is gone”—but now automation enables higher-complexity work, deeper client relationships, and paraplanning roles.

Impact on Advisor Roles and Industry

• Key Change Identified:
  • “The only material thing that’s changed in our industry in 30 years of technology evolution is client loads. And they went down...” — Michael Kitces [16:22]
• Rather than servicing more clients, advisors use freed-up bandwidth to deepen services and go “deeper” with each household.
• Margins, fees, and overhead ratios have not drastically changed.

The Advisor as Life Coach?

• Referencing a McKinsey report that predicts advisors will become life coaches, Kitces concurs directionally (more client-facing services) but tempers the “life coach” label.

  “Increasing depth and the increasing service expansion, I think is real... CFP is now baseline, you go deeper beyond that.” — Michael Kitces [18:33]

• Kitces muses about a future where financial abundance (aided by AI everywhere) raises client questions about purpose, meaning, and next-level problems.

Takeaway

• AI won’t make advisors extinct but will elevate the level of service clients expect.
• DIYers will have better tools; human-centric, advice-driven practitioners will remain essential for many.

3. Private Credit: Bubble or Bad Rap?

With Guest: Phil Hughes (Cliffwater)
[22:09–38:59]

Setting the Scene

• Private credit has exploded, growing nearly $40 billion at Cliffwater alone.
• Media drumbeat calling private credit the “next bubble”—FT, Bloomberg, and Substacks amplify any signs of trouble.

  “They’ve come to the correct conclusion: if you write a negative headline about private credit, you’ll get likes and clicks.” — Phil Hughes [24:54]

Common Criticisms and Realities

• Yield skepticism: Many believe the reported yields can't be real—Phil explains decades of data show default rates and realized losses are historically low, with defaults below average even now.
• Market size: Over 10,000 unique borrowers in the middle market, default averages about 2% annually (approximately 200 defaults expected per year).

Are Software Loans the Achilles’ Heel?

• Much press centers on large allocations to software (e.g., BCRED at 26% software loans) and anxiety over possible defaults.
• Phil notes software’s historical status as low-default, but acknowledges “period of transition” with AI-impacted companies.
• Lenders are first in line; private equity bears the first loss.

Liquidity Concerns & Redemption Pressures

• Growing redemptions at BlackRock, Blackstone, etc.—but mechanisms exist (lockups, liquidity management, revolver capacity) to avoid forced selling.

  “Best-run evergreen structures have a thoughtful liquidity program… The last thing you want to do is ask for money when you need it.” — Phil Hughes [33:13]

Bubble or Not?

• Dispersion of lender quality is always present.
• “Bubble” implies irrational pricing—spreads are tighter, but still compensate for risk.
• Returns in GFC: Even in 2008, private credit index losses were modest; during actual realized credit losses (2009–2010), the index posted double-digit gains due to over-reserved marks and income.

The Real Risk

• Ben’s view: The danger isn’t the loans—it’s nervous clients flooding out at the wrong moment due to scary headlines, leading to forced redemptions.
• Phil advocates: This current stress will prove which managers built for resilience.

4. The Animal Spirits Roast

[39:00–45:31]

• Inspired by a listener’s email poking fun at Michael’s repeated use of “Anywho,” the hosts (and Michael’s kids) deliver a series of playful, often self-deprecating roasts.
• Notable moments:
  • Michael’s twins roast both with kid-friendly zingers (e.g., “Dad, you’re so short, you can high five an ant.” [39:52])
  • Ben and Michael take shots at each other’s quirks, catchphrases, and investing clichés:

    “Ben has published more words about index funds than Vanguard’s entire legal department.” — Michael Batnick [42:11] “You use the word .'ostensibly.' more than any human being I know...” — Ben Carlson [41:54]

  • The roast closes on a mutual note of appreciation and humility.

5. Exhibit A: New Software Announcement

[45:58–46:48]

• Ben and Michael announce “Exhibit A,” their new software company for advisors providing charts and now a monthly, white-labeled commentary report authored by Ben.
• A direct response to advisors consistently asking for “more than just charts.”
• The humor: “Now you can have them, Ben. AI.” — Michael Batnick [46:41]

Notable Quotes & Memorable Moments

• “This market is made of iron.” — Ben Carlson [03:47]
• “I guess you must, like, really like doing that. That’s awesome. You probably don’t want to delegate that to an advisor... Because you know what people who don’t like handling all that stuff do? They’re like, that sounds like an awful lot of shit. I’m just going to hire an advisor and have them do that for me.” — Michael Kitces [10:23]
• “The only material thing that’s changed in our industry in 30 years of technology evolution… its client loads, and they went down.” — Michael Kitces [16:22]
• “If a fund has to prorate investor redemptions, the authors love to throw out, oh, the fund is gated. No, most people are getting most of their money out. Even when funds are prorated, it’s not like 100% of their capital is trapped. That’s just not the case.” — Phil Hughes [34:41]
• On the roast:
  “Your stories are so bad, not even ChatGPT can understand it.” — Michael’s daughter, Kate [40:29]
• “Buy and fold.” (On Ben’s fashion habits.) — Michael Batnick [43:20]

Timestamps for Key Segments

• Market Turbulence Recap – [00:46–03:56]
• AI & Advisor Future – Michael Kitces segment – [05:09–22:09]
• Private Credit Deep Dive – Phil Hughes segment – [22:09–38:59]
• Roast Battle – [39:00–45:31]
• Exhibit A Software Announcement – [45:58–46:48]

Conclusion

Tone: Insightful, conversational, irreverent, and reassuring. Michael and Ben combine a willingness to tackle existential finance questions with their trademark humor and camaraderie. The expert guests add depth, historical grounding, and skepticism to the headline-fueled industry anxiety over AI and private credit. For listeners, this episode is a masterclass in seeing beyond the latest fear or hype—grounding innovation in human relationships, long-term perspective, and, above all, humility.