While it makes sense to turn to free advice found on AI chatbots, there are limitations and dangers to blindly accepting financial guidelines from someone outside of a trusted advisor.
Still, according to a recent survey from JD Power, 40% of consumers admitted to using AI to help manage their finances, with 27% sharing that they found it to be at least somewhat helpful. The survey found that only 34% of consumers felt that they were financially healthy, as Americans continue to struggle with rising costs.
We consulted with experts to learn about the times when AI-generated financial advice falls short of traditional expertise. Here are the five main dangers of AI-generated financial planning, according to financial experts.
1. Generic Advice That Doesn’t Apply to Your Unique Situation
According to Willis Allstead, founder of smart financial planning app Bonsave, “Any chatbot that provides financial advice without read-access to your real accounts will give generic advice right off the bat.”
He stressed that advice to pay off all of your debt first may sound responsible, but if you choose to skip a 401(k) contribution to do so and miss out on a match, that might not actually be a great idea for you. The problem with a chatbot is that it doesn’t understand your nuanced financial situation, and there isn’t always a one-size-fits-all approach.
2. Getting the Numbers Wrong
Allstead said another huge potential issue is the validity of the numbers being sent back. He elaborated, “One thing everyone has come to learn about AI is that it often completely hallucinates answers. For a dinner recipe, that’s inconvenient. But when a chatbot tells you you’re two years away from reaching your safe retirement age when you’re actually five years away, that’s when things get genuinely dangerous.”
This could cost you in the short term and long run because you could make an important life decision based on incorrect data. Another issue with AI financial planning in the short run is that the chatbot may not have access to accurate numbers when it comes to credit cards, loan products and savings accounts.
Even worse, AI can suggest financial products that don’t align with your credit profile or financial goals while also ignoring hidden fees that you could be hit with.
3. Overconfidence With Incorrect Advice
“A big issue with AI is that it gives people advice in a decisive tone when it can’t actually formulate an accurate response given the situation,” remarked Kevin Shahnazari, the founder and CEO of Savvo Technology. He emphasized that it’s tough for AI to give good financial advice when it doesn’t actually know much about you (your debt, tax situation, financial goals and so on).
