AIs like ChatGPT have taken the world by storm, and we’re even starting to see them used in the world of finance.
Artificial intelligence (AI) in finance has become more common, raising questions about accuracy, safety, and privacy. AI models like ChatGPT can mimic human responses. However, their limitations make them risky tools for financial decision-making.
The Rise of ChatGPT and Similar AI Tools
If you’re like a lot of people, at some point in 2023, you created a ChatGPT account and started asking it questions. At first, it’s extraordinarily impressive. You can speak to it as you would any person, and it will respond in a very human-like manner. For many, ChatGPT passes the Turing Test with flying colors.
But it didn’t take people long to start finding cracks in ChatGPT’s armor. Its tendency to “hallucinate,” or invent facts that have no bearing in reality, is well-documented. Two New York lawyers learned the hard way that ChatGPT can invent fake citations when they used it to write a legal brief. In short, if ChatGPT doesn’t know the answer, it will often make one up.
With that tendency in mind, it’s not hard to arrive at a point in which you view ChatGPT’s output with a skeptical eye. That makes the increased use of AI chatbots in financial matters particularly concerning!
Robo Advisors vs Financial Advisors: What's the Difference?
As more people explore AI tools for investing, many compare robo advisors vs financial advisors. Robo advisors use algorithms to manage portfolios automatically. They can be low-cost and efficient but lack the personal touch and adaptability that human advisors provide.
Human advisors consider more than just data. They factor in emotions, life events, and long-term goals. If your needs change, your advisor will understand. A robo advisor won’t ask question; it will just follow its programming.
That’s why human guidance remains valuable.
The development of financial planning AI tools continues to grow. These tools can help users budget, track spending, and model retirement outcomes. Some even integrate with your bank accounts to provide insights based on real-time data.
But no matter how advanced these tools become, they should support—not replace—human decision-making. AI can help organize financial plans, but only you and your advisor can define what success means in your financial life.
How Non-Professionals Use AI in Finance
Non-professionals are using chatbots mainly as a resource to learn information. If you ask ChatGPT, “what is a Roth IRA?” it will probably return an answer that’s generally correct. If you don’t understand the answer, you can refine it by asking, “Explain it to me like I’m a 5th-grader.” The chatbot will give you an answer that’s easier to comprehend.
This can be useful, to a point. As noted earlier, chatbots often answer questions with incorrect or outright false information. To know if an answer is correct, you need enough understanding of the subject to judge it properly. You need to have a good idea of what the answer should be before you can decide if the chatbot’s answer is sound.
Some non-professionals are beginning to use AI for more dangerous pursuits, such as choosing stocks in which to invest their money. This is a practice I find incredibly unwise for a number of reasons. First, as I’ve mentioned before, relying on just one source for investing advice is usually a bad idea. At Asset Preservation Wealth & Tax, we seek multiple viewpoints because no single source is always right.
A second problem with getting financial advice from an AI is that it’s often hard to see how it reached its conclusion. If I ask an investment source, “What led you to conclude I should move my clients’ money into that investment?” that source can explain without making anything up. AI either won’t be able to do so or, for the hallucination reasons discussed above, won’t be trustworthy when it does.
As I’ve said before, one of the most important investing questions to ask is, “What if I’m wrong?” AIs won’t ask that question, and will deliver bad or incorrect advice with the same confidence as good advice. In other words, if you don’t already know what you’re doing, learning from AI is fraught with peril. Why would you want to risk your life’s savings on an algorithm that may not fully understand your question?
How Professionals Use AI in Finance
Financial professionals are using AI in several different ways. Like most computing systems, AI can absorb massive amounts of data — far more than any human can process. As such, there’s a use case for artificial intelligence in wealth management as a gatekeeper.
More firms are beginning to explore AI and automated wealth management. AI tools automate reports, assess portfolio risk, and scan the market for emerging trends. These applications save time and support analysis, but decisions still require expert review.
A professional could ask, “Find the 20 investment strategies with the greatest potential for superior returns.” After, they can review them to pick one for a client. An AI can review every potential investment strategy and base its conclusion on more raw data than a human.
This kind of work often relies on machine learning in finance, which allows AI to detect patterns across vast financial datasets. While the insights can be valuable, the accuracy still depends on quality data and proper human oversight.
As with amateurs asking AI questions, that strategy is also dicey. How can an advisor know if the AI has picked the 20 best options? Blind trust in the output of anything, even if you have the expertise to vet the results, is dangerous.
That’s why at Asset Preservation, we aren’t using AI as part of our process to advise clients. Doing so would increase our efficiency markedly; we could advise more clients with a smaller staff. But at what cost?
We know skipping AI in our advisory process might reduce volume. But for quality, we trust our humans every time.
There’s another problem we haven’t yet explored, which affects both professionals and laypeople: privacy. Generative AI systems train themselves in part via their interactions with people asking them questions.
In other words, anything you type into an AI system can, and probably will, be stored. When dealing with financial information, keeping it private matters. But AI might repeat the data you give it.
Think about that for a moment: AI knows who you are and can relay your data to someone else.
Everyone, professional or not, should assume anything shared with AI could become public.
The final point about AI in finance is its built-in weakness, which will remain no matter how advanced it gets. Even if AI stops inventing facts or misreading questions, it will still lack one key part of human intelligence. It won’t care.
At Asset Preservation, we entered this career field because we have a genuine interest in finance. We advise clients because we care about helping them grow their money and secure dream retirements.
AI doesn’t have the capacity to care. If it gives you bad advice and you lose everything, that won’t even register as a problem for the AI.
When seeking tailored financial advice, it’s important to get it from sources that care about that advice’s impact on you. Only humans can provide that. It’s important to have a real, living financial advisor as your decision-making partner.
Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
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