How to Safely Use AI for Financial Advice

Time to read: 6 Minutes

It’s no secret that AI, or artificial intelligence, is being used with increasingly regularity. From AI notetakers, like Fathom, Firefly, or AI Companion, to sites like ChatGPT that allow you to ask questions, give prompts, and even have full blown conversations, the ways people use AI are wide and varied. In the coming years, the ways we use AI will, in all likelihood, continue to grow as the tool becomes more effective and knowledgeable.

Naturally, people have started to use AI for all kinds of advice. Meal planning advice, career advice, and yes, even financial advice. While this isn’t inherently a bad thing and while there can be some beneficial ways to use AI for financial advice, it’s still something that should be done with caution for many reasons.

Keep reading to learn more about how to safely use AI for financial advice and what to avoid.

AI Is a Research Tool, Not an Industry Expert.

Where many people run into big issues with AI is assuming that it’s an expert in any topic they ask about. Unfortunately, that isn’t the case. In reality, AI can be a great research tool, but only when it’s used in combination with other research, information, and guidance from verified sources.

Because AI can create plans with step-by-step instructions and may even be able to make those plans feel specific to your circumstances, it’s easy to forget that an AI chatbot is only one source. Just as you wouldn’t use advice given in one singular article to make all your investment decisions, you shouldn’t use a conversation with an AI chatbot to make all of your decisions, either.

Instead, gather information from several sources – different websites, podcasts, webinars, and financial professionals.

In fact, one of the most effective ways we’ve seen AI used is as an educational tool that helps a client get preliminary information before meeting with a financial advisor. Perhaps they aren’t sure what to expect out of their relationship with a financial planner or want to better understand how the stock market operates so they can ask more targeted questions. By asking questions like “what is compound interest?” or “what is tax efficient investing?” they may feel more prepared to meet with a financial advisor.

Remember That AI Is Still Learning.

AI doesn’t have full, holistic, unbiased knowledge of any topic, let alone every topic. Instead, it gathers information from a variety of sources, including information that is already on the web and conversations it has with other AI users.

More likely than not, your conversations with an AI chatbot are being used to train the next model – and that’s exactly how the current version was trained. The information the AI chatbot is passing along to you may have been gathered from conversations with people in a different financial position than you, who have a lower or higher risk tolerance, whose goals are very different than yours, or who have (intentionally or not) given AI incorrect information to work with.

The conversation you have may only represent one point of view or opinion on good financial planning practices, and the information you have may be biased or skewed.

That doesn’t necessarily mean that something shared by an AI chatbot is wrong. However, it does mean that AI services absolutely cannot (and will not) guarantee that anything shared by the software is accurate.

AI can still provide useful information, but you should exercise caution, verify advice given by AI with credible sources, and trust your intuition when the advice is given to you doesn’t make sense.

Protect Your Information.

Unlike a financial advisor who you’ll give access to all your financial information, sensitive information should never be shared with AI for one sole reason: it isn’t intended or guaranteed to be a secure, private conversation.

Full financial statements, anything with identifying information, or highly specific information about your finances should stay private.

Instead, when using AI, create a fictional scenario with figures and details that don’t exactly match your personal situation or finances. You can still get relevant advice without divulging all of your information.

Start Small With AI.

AI isn’t a good one-stop-shop for financial advice, but there are ways it can be a great tool. Consider using AI for tasks like creating a basic budget or expense planning.

Simple prompts like “create a budget for a family of five with $10,000 monthly gross take home pay and adding approximate expenses and savings goals is a great way to start building a budget. Similarly, asking AI for advice on how to cut down on specific costs, like food costs, or for advice on how to lower your electric bill, can give you great information.

These prompts are useful because they are relatively low stakes, don’t share personal information, and don’t rely on AI created strategies to manage your financial interests.

Remember: AI Is Not a Substitute for a Professional.

The most important thing to remember when using AI for financial research and education is that AI is not a substitute for working with a financial professional of any kind.

This becomes especially important if your finances are complex (as AI likely won’t understand the nuances of your goals, assets, and portfolio), when you are nearing any kind of a milestone, or at times when you may be prone to emotional decisions.

Aside from all the reasons listed above, a big component of this is that AI doesn’t understand the human element behind financial decision making. It likely won’t understand the importance of your goals and their time horizons, grasp the full picture of your circumstances, or take into account that both of those things, as well as market conditions, regularly change. The advice AI gives won’t be tailored to your needs, but a plan that a financial advisor creates alongside you will be.

Ultimately, AI is a tool that can be used for financial planning, but it should never be treated as a financial resource that is blindly trusted. AI is great at providing information, but there are no guarantees that information is 100% accurate, lacks bias, or fully explains the nuance involved in financial decision making. Always be sure to verify information and advice with credible, trusted sources and professionals.