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I'm torn by stating a half dozen good reasons why portraiture painting will always have a market.
I the end I think it's not important to find arguments to prove to any photographer friend whether a portraiture career is valid or not. It's only important that the person who wants to be a portrait artist is confident it's valid. And for that I'd say two key things: Firstly, what does the market say - if your work is well received and you find clients, then you're on your way to a valid career.
Secondly, making some assumptions about a person's cost of living, the price they charge per painting, and how efficiently they paint and market themselves, one does not need but 20 or so clients a year to do very well. So unless the artist is working in a small town, there should be enough potential clients to make it work.
If that photographer "friend" was right, then using his logic the DeBeers family might as well close up all the diamond mines in the world now that we have stunning cubic zirconia.
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