Can generative AI fill the role of a financial planner? For advisors and investors alike, it’s a tricky question.
Advisors say they’re hearing from a growing number of clients who use generative AI tools like ChatGPT to learn about financial concepts, get advice or even question their planner’s guidance.
That trend isn’t isolated to any one group, but a recent survey from financial advisory fintech Betterment found that younger generations are especially comfortable with using AI for financial advice.
In a survey of 1,200 investors, a majority of Generation Z and millennial respondents said they use AI at least once a month to get financial advice. On average, 53% of respondents said they use AI for financial advice, including 38% who use it weekly.
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Among those who reported using AI, roughly half said that they use it to eliminate emotional bias in investing and get help making decisions.
While a majority of surveyed investors are willing to get financial advice from AI, a smaller share (30%) said they actually trust it. And just a quarter of investors said they would let AI manage their investments.
Nick Holeman, director of financial planning at Betterment, said that the generational gap in AI use comes down to a couple of different factors.
“Younger people tend to adopt things earlier,” Holeman said. “But I think there are a couple of other things, too, like they have less to lose, right? If you’re 60, you’ve had decades to build up your nest egg, and then you turn it over to AI and it does something dumb. The risk there is huge.”
Can AI work as a check on an advisor’s advice?
For some advisors, the trend of clients using AI to get advice isn’t as novel as it might seem at first.
“Clients have always attempted to get second opinions on recommendations, so nothing is new there,” said Matt Chancey, founder of Tax Alpha Companies in Tampa, Florida. “It’s just who they are asking for a second opinion that has changed.”
The issue of hallucinations is still a very real problem for generative AI, but advisors say that models today tend to be more often right than wrong. The real issue, they say, is with the person asking the questions.
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“The issue is probably in the prompting techniques,” said Donald LaGrange, a financial advisor at Murphy & Sylvest Wealth Management in Rockwall, Texas. “Each individual’s situation is so nuanced, but the AI advice is typically pretty generalized. The errors are generally in the individual application of a concept.”
Maggie Liu, the director of Asian Wealth Advisory at Focus Partners in Menlo Park, California, said that clients from the tech industry are especially quick to use AI as a check against her own advice.
“We’re trying to explain a complex investment strategy of some sort, and we give them all the information materials … and you see people do that second layer of checking by just simply copying everything you have, put into ChatGPT and see what it says,” Liu said. “Then they come back to you and ask questions about it. And we see questions or answers are not 100% correct or accurate, because it’s kind of like taking out the context.”
Where AI excels — and falls short
As investors become more comfortable going to chatbots for financial advice, advisors say it’s important to remind them about its limitations without rejecting the technology outright.
“I like to meet my clients where they are, and many are consuming AI and social media,” LaGrange said. “When they bring these topics to me, it’s a great opportunity to help them understand the reasons some might apply to them and some might not. I think it strengthens our relationship and deepens their trust in me.”
When it comes to finances, AI is a good jumping-off point, but it falls short of comprehensive planning, advisors say. That could change as AI becomes more integrated into financial platforms, but prompt engineering will likely continue to be a limiting factor for many.
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A lack of understanding from the user will almost always be a limiting factor when it comes to AI providing financial advice, according to Cameron Valadez, co-founder of Planable Wealth in Riverside, California.”Even if you feed it tons of information about your personal situation, you may be unintentionally leaving out very important information such as certain tax deductions you have as a business owner, the fact that you are very likely to inherit large retirement accounts within 5-10 years, get diagnosed with a terminal illness two years later, etc., and how those will affect your financial and tax situation,” Valadez said. “The client doesn’t know what they don’t know.”
As more clients experiment with chatbots as a tool in handling their finances, advisors need to be clear about what they can and can’t do.
“Let clients know that AI is powerful, and very useful in certain circumstances, such as finding and summarizing data,” Valadez added. “However, it shouldn’t be relied on for personal financial advice to take action on.”
