3 risks of using AI for personal financial advice

It’s no surprise that so many people use the internet as a personal assistant. It’s always there, at the touch of a button.

Now, the evolution of AI technologies is taking this reliance a step further, transforming the way we live. From simple actions like using biometrics to open your phone to assisting with complex medical diagnostics, it’s found its way into most parts of life.

However, AI is not infallible and, when it comes to your finances, there are some serious risks associated with using AI for DIY financial advice.

Research shows that AI offers unreliable, inaccurate advice in a high number of instances

In many cases, AI can be a helpful and valuable tool. It can make life more convenient via virtual assistants like Alexa or by reducing time spent on tedious, time-consuming tasks.

This has percolated into the world of personal finance, too. Research from Lloyds Banking Group has revealed that 56% of UK adults have used AI in the past year to manage their money. ChatGPT was referenced as the most useful platform, used by 6 in 10 people.

However, a study from Investing in the Web found that ChatGPT fails in 35% of finance-related queries, giving incomplete, misleading, or inaccurate answers.

Such a high number of reported errors means that using AI for financial advice is a potential risk to your personal finances.

Working with a financial planner offers much more security and reliability than you’ll find with AI

There is no doubt that AI can bring an abundance of benefits in certain areas. We use it ourselves, as an administrative aid. However, using it for something as important as your financial planning can open you up to some real drawbacks and risks.

1. Lack of personalisation

When you work with a financial planner to create a strategy, we look at your individual set of circumstances to make a plan for the present and the future. This tailored, structured approach will embrace a range of factors, such as your:

• • Income
  • Investments
  • Family circumstances
  • Planned retirement age
  • Goals and aspirations for the future
  • Attitude to risk

From here, we can develop a tailored financial strategy that aligns with your unique lifestyle and ambitions.

AI is very good at emulating humans, but there is no chatbot that can deliver the highly personalised service a financial planner can.

Also, while ChatGPT might seem to have all the answers, it can only use the information it’s been fed. This means it could be missing vital information, and the replies you get will often be vanilla and generic.

On the other hand, when you talk to us at HarperLees, we take our time to get to know you, building up a picture of how to create your financial strategy. Some aspects of financial planning, such as estate planning, can be difficult on a personal level. Empathy, understanding, and reassurance can go a long way here, and these aren’t qualities you’re likely to find in a chatbot.

2. Lack of regulations

Financial advisers and planners in the UK need to be approved or authorised by the Financial Conduct Authority (FCA).

The FCA sets a range of standards, including:

• • Protecting consumers
  • Enhancing market integrity
  • Promoting competition
  • Investigating breaches of regulation
  • Proactively supervising firms

Your financial planner has a duty to work in your best interests, and if you receive a product or service you’re unhappy with, you can complain to the Financial Ombudsman Service (FOS), which will investigate on your behalf.

Act on guidance from ChatGPT, however, and you’re not protected in the same way. There are no ethical regulations attached, and therefore no accountability.

3. Security risks

Working with a financial planner means sharing sensitive data and personal information.

We are bound to follow the General Data Protection Regulation (GDPR), the Data Protection Act 2018, and the FCA’s Principles for Business, all of which can reassure you that your valuable data is being kept in safe hands.

We would strongly recommend that you never share any personal, private, or confidential data with chatbots. In some cases, fraudsters use chatbots to develop a relationship with users, which can ultimately turn into a scam that’s hard to detect and even harder to follow up.

Get in touch

When you work with us, you know you’re with a financial planner authorised and regulated by the FCA. We’ll offer a sensitive, empathetic approach to your financial planning, all with the human touch.

If you’d like to talk to us, we’re always happy to help. Please email us at info@harperlees.co.uk or call 01277 350560 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.