How to Use (and Not to Use) AI for Financial Advice and Investing
AI can't take the place of the human touch when it comes to getting investment advice and planning for your future.
From meal planning and research to fact-checking, copy editing and document summarization, artificial intelligence (AI) is rapidly altering the contours of daily life, becoming as indispensable as a basic internet connection.
But AI is not a magic wand. It's a tool that, when used responsibly, can improve efficiency and fill in specific knowledge gaps.
Within financial services, AI is becoming a bigger factor, both at the adviser level and among consumers, who have more access than ever to educational tools to support planning and investing.
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In some ways, this access can be beneficial to consumers and participants, giving them unprecedented access to resources that help them be more involved and invested in their financial planning.
1. Everyday efficiency
I'm probably not the only person who uses ChatGPT to help with shopping and meal planning. With a single prompt, I have a ready-made grocery list and budget-friendly dinner plan built around my specific tastes and dietary guidelines.
Could I achieve the same thing by flipping through cookbooks or doing a Google search? Probably. But it would take a lot longer to sift through all the recipes that don't meet my criteria.
In finance, AI can serve a similar purpose, helping potential investors to get the lay of the land. Someone can use it to compare two investment options or learn about complementary opportunities.
It's a low-stakes way to familiarize yourself with the dizzying array of investment options.
2. Learning and definitions
AI is a great learning tool. At a basic level, you can use Claude or ChatGPT to provide definitions for common terminology: What is a stock? What is a bond?
Of course, Google does the same thing, but AI does it more efficiently and effectively.
3. Fact-checking professionals
Though AI can't replace a professional, it is effective for fact-checking, much in the way that patients can consult with another doctor to get a second opinion.
Humans are fallible (though they're less prone to errors than their robotic cohorts), so it's always healthy to do some quick fact-checking
However, when it comes to your finances, AI is not, and can't be, a substitute for professional expertise. It can't replace the empathy and connection that another human can provide.
4. Bad prompts produce errors
Ever heard of "garbage in, garbage out"? If you give AI a confusing prompt, you're likely to get a muddled answer.
I experienced this firsthand during planning for a group bike trip. As an avid cyclist, I turned to my trusty AI assistant to help plan a multiday bike route for me and some of my colleagues.
Apparently, something in my prompt was confusing, and on the last day, instead of setting out on a 30-mile ride, we discovered that it was, in fact, an 80-mile route.
I learned a hard lesson: Clarity is everything, and even small errors can lead to mistakes that you might not catch until it's too late.
5. Easily confused
AI is not great at juggling multiple thoughts at once. Specifically, it can conflate similar-sounding but different concepts such as a separately managed account vs an adviser-managed account, or a retirement-plan brokerage window vs a retail-brokerage account.
While these distinctions might seem small to the layperson, they're important because they involve different fee structures, governance and access rules. AI can slip up when multiple concepts converge, even if it gets them right individually.
6. Bias and data limitations
Studies have shown that large language models (LLMs) have consistently demonstrated bias across categories such as gender, race and age. While this is a discrimination problem, it also contributes to functional errors as diversity of thought leads to better, more accurate outputs.
Even in a perfect world, Claude or ChatGPT could never replace your doctor, lawyer or financial adviser. People want to look across the table at someone they trust when discussing critical issues such as their health and finances.
They also want accountability. A couple of years ago, I started working with a running coach. If you're not an avid runner, the idea of a coach might seem ridiculous. Running is just putting one foot in front of the other, right?
Well, in addition to helping with training, sleep and diet, my coach keeps me accountable. I pay for a coach not because I don't know how to run, but because someone showing up to my house in the morning keeps me accountable. I won't skip a run if I know Jeremy is going to be there. AI is not going to solve that issue.
Likewise, the value of the adviser-client relationship is accountability, trust and follow-through. As an investor, AI can be a useful tool to help you become more efficient and better informed, but it will never be a substitute for your financial adviser. Supplement, don't supplant.
You're likely not the only one using AI. Your financial adviser might use it, too, which is OK, even smart, but you're entitled to know how they're using it and make that part of the decision-making process.
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