The Financial Conduct Authority (FCA) has found one in five adults is open to AI making financial decisions for them, particularly when the choices feel complex. But, have you ever considered whether the information these chatbots provide is correct?
An article in the Financial Times on this very subject caught my eye recently and the results were surprising…
AI is rapidly becoming part of everyday life and millions of people are turning to chatbots as their primary research and information tools.
Increasingly, the likes of ChatGPT, Claude and Copilot are being asked financial questions by consumers, but new research shows we should be careful about trusting the answers they provide.
Technology firm, Saturn, tested 18 AI models against 121 financial questions, repeating each one five times to assess consistency. The study found the answers were wrong, on average, 57% of the time. When asked more complex questions, the frequency of mistakes rose to an average of 88%, with some models giving incorrect answers in 99% of cases.
For anyone using AI to help them make financial decisions, these findings are a timely reminder that convenience and accuracy are very different things. Acting on information the bots provide without verifying it or considering your circumstances could result in serious losses.
Misplaced trust
The results of this study into AI-generated information highlighted a number of common issues. Some of the answers contained calculation errors, whilst others omitted forthcoming tax changes. Most worryingly, some bots apparently created rules that simply don’t exist.
When this information is presented as fact to the user, it becomes very difficult to distinguish accurate information from a potential costly mistake. “Sounds about right” is a dangerous conclusion to draw when your retirement is at stake.
Financial planning is full of nuance and a chatbot simply can’t understand the personal circumstances that play such a crucial role in the decision-making process. A small detail can completely change the appropriate answer to any question about your financial future.
For example, when we are building recommendations for pensions and investments, all of the following questions are taken into account:
- Are you employed or self-employed?
- Where does your income come from – salary or dividends?
- How much pension have you already withdrawn?
- Which tax allowances apply to your situation?
- How old are you and what are your future aspirations?
A generic answer generated by AI might sound convincing, but it can’t reliably determine what is right for you without knowing the answer to all of the above. In many cases, there might not be a single correct answer. A financial planner, however, will talk you through the range of options and outline their risks, tax implications and long-term consequences to help you make a decision.
Information is not planning
AI is becoming a valuable information tool and it can be useful for budgeting and research, but financial advice requires interpretation.
We planners not only consider the technical rules, but also your objectives, concerns, family circumstances and attitude to risk. It’s not a one-size-fits-all process and a recommendation that suits you might be completely inappropriate for someone else.
This is why regulated financial advice continues to have such an important role to play. We gather detailed information about you, assess the suitability of recommendations before they are presented and document our findings. There are no quick answers.
Does this mean AI has no place in financial planning? Absolutely not. We are using it extensively within our business to refine processes and increase administrative efficiency. AI can also help you better engage with financial concepts and become more informed before you seek advice, but it cannot and should never replace the financial decision maker.
The reality is, more people will use AI as a research tool, but as the Saturn study shows, caution is essential. Before acting on any information it provides relating to pensions, investments, inheritance tax, mortgages or retirement planning, ask yourself “how confident am I that this answer is up-to-date and relevant to my circumstances?”
The Financial Times article served as a timely reminder to me that even the most sophisticated technology can make mistakes, misunderstand context and provide answers that are incorrect. It reinforced that personalised advice, professional judgement and human accountability remain as valuable as ever.
AI is improving at an extraordinary pace. It is an excellent starting point when you wish to know more about a financial issue, but it shouldn’t have the final word.
If you would like to talk to us about retirement, reviewing your investments or inheritance tax planning, why not arrange a free, initial conversation with one of our experts? Contact us on (01246) 298181 or email: enquiries@belmayne-ifa.com
