Humans have been fascinated by the idea of Artificial Intelligence (AI) for millennia, stretching back many centuries before the launch of ChatGPT. Scholars often cite the bronze giant Talos from Greek mythology as one of the early precursors to modern ideas of robots guided by human input.
However, although the intrigue is longstanding, the widespread introduction of large language models in 2022 revolutionised AI and the way we interact with technology.
As AI becomes increasingly accessible and integrated into everyday life, few industries remain untouched by its influence, and finance is no exception.
Research from Experian reveals that 67% of Generation Z (ages 13 – 28) and 62% of millennials (ages 29 – 44) said they have used or would consider using AI to help manage their personal finances. While there is nothing inherently wrong with this, there are multiple pitfalls to be aware of before doing so.
Read on to discover five key risks to consider before using AI for financial planning.
1. Lack of personalisation
One of the core principles of financial planning is the emphasis on personalisation. A financial planner will take a holistic approach and try to understand your unique goals, circumstances, and values, and then help you create a strategy based on your whole life, not just your investment portfolio.
Meanwhile, AI tools often rely on templates and models based on generic data. As such, the advice it offers may be based on assumptions that don’t align with your specific situation.
For example, AI may suggest an investment strategy for a generic risk profile but not account for life events you have on the horizon.
While you could input these events, part of the role of a financial planner is to alert and remind you of things you may have either forgotten or never considered. AI, on the other hand, can only consider what you tell it to.
2. No accountability or regulation
Licenced financial planning firms in the European Economic Area (EEA) are regulated by an EU regulatory body, which should have sufficient Professional Indemnity (PI) insurance in place.
If a financial firm fails, the relevant body could help you make a claim if you lost money due to poor advice or mismanagement, but only under certain conditions.
Not only this, but financial regulators also ensure firms adhere to strict standards and procedures – however crucially, protect customers against harm or bad conduct caused by firms.
AI models offer no such protection or regulation. This means that if you follow the advice of an AI and something goes wrong, there is no recourse, no accountability, and no professional obligation to act in your best interests.
3. Data and security risks
Good financial planning requires a comprehensive understanding of your financial and personal situation.
If you share sensitive information with AI, you could be exposed to data breaches or misuse of your data, particularly if the provider lacks robust security protocols.
Of course, a human could also misuse your data, but again, there are industry regulators that can help protect you, and they will come down harshly on any breaches. With AI, there are no such guarantees.
4. Potential for errors
AI can also be prone to errors that might not always be easy to discern.
For instance, a study reported by TechRound found that ChatGPT had a 52% accuracy rate when answering questions about software development.
Moreover, there was one occasion in 2024, reported by the Independent,when ChatGPT started speaking a combination of Spanish and English – “Spanglish” – to users, with no clue as to why this malfunction happened.
While these may be extreme examples, they clearly indicate that AI is highly fallible and prone to malfunctions and inaccuracies.
As such, relying on it to make important financial decisions poses a considerable risk, as the information you receive may be filled with errors.
5. No human touch
In addition to helping you build a plan for achieving your life goals, financial planners can also offer support during times of uncertainty or personal difficulty.
For instance, during market downturns, you might feel tempted to exit to avoid losses, but a financial planner can offer perspective, helping you stay grounded and focused on the long term.
Similarly, when a high-performing trend captures your attention, a financial planner can guide you through the hype, helping you assess whether it aligns with your overall strategy rather than chasing short-term gains.
Financial planners can also help you during challenging times, such as going through a divorce or managing finances after the loss of a loved one.
AI, on the other hand, can’t offer emotional intelligence or empathy, and can’t provide a human touch when it’s most needed.
So, to speak to a real, human financial planner, get in touch.
Email contact@ambient-wm.com or call us on +34 658 077 450.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.