You’re only a few clicks away from the answer to any question that pops into your head. How do I stop my Yorkshire puddings sinking? Who topped the charts the day I was born? Should I take my pension tax-free cash?
The speed and convenience might be impressive, but AI-generated answers can sometimes be inaccurate, creating confusion, particularly when it comes to your finances.
There’s no denying technology is transforming the way we access and consume information. But where your finances are concerned, it’s important to recognise the difference between the educational content AI provides and the knowledge and experience imparted by a financial planner.
Making that distinction has never been more important.
AI knows nothing about your circumstances
Modern AI tools can quickly explain financial concepts, summarise complex subjects and answer general questions about monetary issues. This is great if you need help understanding the ins and outs of an ISA, the inheritance tax rules or the investment markets.
What AI doesn’t know is your background (unless you explain it) and even then, it can’t fully understand the many factors and nuances that influence really good quality financial planning.
For example, an AI tool can outline the benefits of paying more into your pension, but it can’t properly assess your objectives, tax position, income requirements, existing assets, attitude to risk or capacity for loss. All of these things form part of the decision we make when recommending an appropriate contribution.
It is the difference between education and advice. AI can help you understand a subject, but you need the latter to make an informed decision.
Choose advice that’s personalised – from someone accountable
Providing financial advice in the UK is a regulated activity. That means we have to follow a pretty stringent set of rules that places your best interests at the centre of the process.
We have to gather detailed information about you so we can understand your objectives, assess the suitability of our advice and provide recommendations that reflect your circumstances. These must be documented, justified and supported by evidence. If we don’t follow this process, we’re held accountable by the FCA.
A financial planner has a formal duty to consider factors including:
- Your current financial position
- Family circumstances
- Existing investments and pensions
- Tax considerations
- Capacity for loss
- Attitude to investment risk
- Long-term financial goals
These consumer protections simply do not apply to the information generated by an AI platform. Put simply, if you act on its advice and it’s incorrect, or the outcome is not what you’d hoped, you’re on your own.
Technology is streamlining the advice process, but it can’t replace planners
AI can be helpful and it’s certainly driving efficiency gains for financial planning firms, which ultimately leads to better outcomes for clients. However, it isn’t infallible. Even when the information provided is factually accurate, it might not be suited to you.
Let’s consider the question we posed at the outset: “Should I take my pension tax-free cash?” The answer we provide depends entirely on your age, income needs, tax position, health objectives, other assets and family circumstances. A generic AI-generated response can’t replace the detailed planning conversation that comes first.
Financial advice has always been – and still is – a people business. The most valuable conversations we have with clients aren’t about products or investments, they’re about life goals, family priorities, concerns and future aspirations. AI can’t replace the empathy, judgement, experience and professional expertise that form the foundations of our work.
Become better informed
One of the greatest opportunities AI presents for planners is its ability to improve financial education among consumers.
If you understand the basics of pensions, investments, tax allowances and estate planning before coming to see us, it can often result in more meaningful discussions. The better informed you are, the better questions you ask and the more confident you will feel in your decision-making.
We would actively encourage you to learn more about your finances and seek information from a variety of sources. The key is recognising where education ends and advice needs to begin.
The future is unlikely to be a choice between regulated or AI advice. It will be a combination of both. Technology can help you understand your options, whilst a good financial planner will make sure you choose the right path to retirement.
If you would like to talk to us about your pensions and investments, why not arrange a free, initial conversation with one of our experts? Contact us on (01246) 298181 or email: enquiries@belmayne-ifa.com
