Can I use AI as a source of financial advice?

With people increasingly turning to AI to solve everyday problems, a rising number are considering its usefulness in providing financial advice.

In fact, according to the Lloyds Banking Group’s latest Consumer Digital Index, Artificial Intelligence has rapidly become a financial tool for millions across the UK, as 56% of adults (around 28.8 million people) say they’ve used AI in the past 12 months to help manage their money. Among them, ChatGPT is referenced as the most popular platform, used by six in 10.

A further survey of 2,000 adults found that two fifths (40%) of respondents have used AI tools such as ChatGPT for financial planning or advice, and a further 24% say they would consider doing so. Overall, almost half (49%) of those surveyed say they are likely to trust financial advice from either social media or AI tools.

My conversations with clients in recent months have revealed the same trend, with many asking me about the validity and rationality of using it for that purpose. Rather than an outright no, my stance is that although I do believe that AI has the potential to empower people with knowledge and improve efficiency, my primary concerns centre around the amount of trust people are prepared to put in the technology which, when it comes to financial advice, unsurprisingly rings some alarm bells. 

If it’s so popular, what is the problem with using AI?

Whilst AI can certainly provide value when it comes to the heavy lifting of research, number-crunching or even running various financial scenarios to predict outcomes, a recent Which? study of ChatGPT, Copilot and other alternative platforms uncovered instances of incorrect and misleading tips on investments, tax and insurance. Something which didn’t exactly come as a surprise to those of us operating in the financial industry.

Tests on the most popular chatbots found Microsoft’s Copilot and ChatGPT advised breaking HMRC investment limits on ISAs, ChatGPT wrongly said it was mandatory to have travel insurance to visit most EU countries, and Meta’s AI gave incorrect information about how to claim compensation for delayed flights.

Which? said its research, conducted by putting 40 questions to the rival AI tools, “uncovered far too many inaccuracies and misleading statements for comfort, especially when leaning on AI for important issues like financial or legal queries.”

Whilst the reply from Microsoft that people should be verifying the accuracy of the content they get from AI, is of course true, I believe that it goes deeper than that. Not only could responses include inaccurate information but there is a risk of glossing over nuances, providing guidance that doesn’t take individual complexities into account, or simply tells the user what they want to hear.

A lack of accountability

Using ChatGPT as your financial adviser is a bit like Googling your symptoms and skipping the doctor. You might land on something broadly right or something dangerously off. AI is exceptional at processing information, but it doesn’t know your goals, your tax position, your time horizon or how you actually feel about risk. And crucially, it can’t take responsibility if the guidance is wrong.

Good financial planning is built on nuance. The difference between the right and wrong pension strategy, ISA structure or investment approach isn’t theoretical it has real, long-term financial consequences.

Operating without the whole picture

Financial decisions also do not occur in a vacuum. They are influenced by a whole range of factors, be that the external economic environment, wider business goals or internal stakeholder dynamics, far too many elements for an OpenAI engine to consider effectively. Financial advisers serve as strategic partners, taking a holistic view of your business and providing tailored guidance that is designed to steer you towards success. Whilst an AI response might offer up a tempting ‘quick win’, there is a risk of it being a decision that is damaging to someone’s position in the long run.

A trusted partner… who doesn’t just say what you want to hear

I also feel strongly about the crucial role that empathy and reassurance play in financial advice – skills that are often deemed ‘soft’ or ‘fluffy. When people are facing tricky life decisions, complex scenarios or are navigating a stressful situation, having someone by their side who can lift the worry from their shoulders and provide informed guidance is worth their weight in gold.

But financial advisers and accountants are not just there to put clients’ fully formed ideas into action, in fact much of their value comes from acting as a sounding board and allowing clients to bounce initial concepts off them. 

Rather than acting as an echo-chamber, as friends and family may be inclined to, or churning out generalist and largely ‘positive’ advice as AI tends to, financial advisers are simply there to examine the facts and use their expertise to give informed guidance. In other words, they have no pressure or loyalty to tell a client simply what they want to hear and can instead deliver honest feedback, even when it won’t be popular.

Ultimately, the judgment, regulation and accountability elements of financial advice should sit firmly with a human adviser. The prudent approach is to use tools like ChatGPT to enhance your understanding and level of financial literacy rather than to replace expert, regulated advice tailored to your life.

If you have a question about the financial guidance that we offer or would like to discuss the tools that you can use to better manage your finances or portfolio, please do not hesitate to contact me and set up a call.

Gerald Edelman Wealth Limited is an appointed representative of Best Practice IFA Group Limited which is authorised and regulated by the Financial Conduct Authority. Gerald Edelman Wealth Limited is entered on the FCA register under reference 971871. The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren’t able to resolve themselves. To contact the Financial Ombudsman Service, please visit www.financial-ombudsman.org.uk