Over the past few years, AI has evolved from the stuff of science fiction into a practical tool that is becoming increasingly prevalent in everyday life.
While some may push against it, it’s clear that AI is here to stay, and its influence is already being felt across many industries and professions, including financial planning.
A recent survey from Experian found that 1 in 3 adults (33%) already use AI to learn about personal finance topics, and nearly half (47%) either use or are open to using it to help manage their wealth.
These figures are even higher among younger generations, with 67% of Gen Z and 62% of millennials saying they use or would consider using AI tools for financial management.
While AI can undoubtedly improve the efficiency of some basic steps in financial planning, it’s best viewed as a complement to professional advice, not a replacement. At its core, financial planning is human-centred, and it looks beyond just your money and other data inputs to help you define, plan for, and achieve your long-term goals.
Read on to learn about some of the key risks to consider before using AI for financial advice, how financial planners use the technology, and why it won’t replace your planner.
The key risks of using AI for financial advice
If you choose to use AI for some of the simpler elements of financial planning – perhaps to create a budget, improve your understanding of a topic, or for general information – it’s important to be aware of the pitfalls involved.
Here are some of the key risks to consider.
- No personalisation
AI can only work with the information it’s given. While it may generate useful suggestions based on standard models, it’s unlikely to alert you to things you may have missed or provide the kind of guidance that comes from understanding your unique situation.
A financial planner, on the other hand, takes the time to understand your goals, responsibilities, values, and circumstances before offering tailored recommendations. Through this holistic approach, they consider your whole life beyond just numbers and data inputs to help you achieve your goals.
- No regulation or accountability
If an AI platform provides advice that turns out to be incorrect or even harmful, there’s no legal accountability, no regulator to step in, and no financial safety net to protect you.
By contrast, in the UK, financial advisers must be authorised and regulated by the Financial Conduct Authority (FCA). This regulator enforces strict standards and protects consumers against poor or unethical advice.
- Risks of data breaches or sharing
Getting meaningful financial advice requires sharing sensitive details, such as your income, investments, debts, and more. Entrusting that information to an AI system carries risks, especially if the platform lacks proper security measures, and you may be left vulnerable to data breaches.
- Potential for errors
For all its technological impressiveness, AI is far from error-free. In fact, according to Chatbase, older versions of ChatGPT achieved only 50% – 80% accuracy, and even the most recent version, at 88.7%, still carries an error rate of 11.3%. In the context of important financial decisions, that margin for error could come at a significant cost.
- No emotional element
AI can’t listen with sensitivity, pick up on tone or emotion, or guide you through the complexities of grief. It also can’t navigate family dynamics and the relationships that often underpin estate or succession planning, which are areas where trust and empathy are key.
In short, AI can’t empathise and simply lacks the human understanding that a financial planner brings
AI is best used to assist human input, not replace it
A financial planner will work with you to clarify your goals, understand your circumstances, and create a plan that helps you move towards the life you’ve envisioned.
While AI can play a supporting role in this process, it doesn’t have the human insight and judgement needed to deliver the best outcomes, and as you read above, relying on it alone comes with risks.
At Amber River, our financial planners already make use of AI in a way that enhances, rather than replaces, the planning process.
For example, PlannerPal, an AI assistant designed specifically for UK financial planners, helps with administrative tasks such as transcribing client meetings or drafting follow-up emails.
By taking care of the background work, tools like PlannerPal free up financial planners to focus more on clients, allowing for even greater dedication and support for the work that matters.
Get in touch
There is simply no replacement for the real human connection, perspective, and guidance that a financial planner can bring to the table to help you achieve your life goals.
To speak to an Amber River financial planner, get in touch.
To set up an initial appointment, call 0800 915 0000. Alternatively, you can use our contact form to arrange an appointment.
Disclaimer
The information within this article was correct at the time of publishing, but laws and tax rules are subject to change. Your circumstances and where you live in the UK may also have an impact on your tax treatment.
