Should you let AI give you financial advice?

Can AI fill the financial advice gap? Kalpana Fitzpatrick looks at the pros and cons of using AI to guide your finances.

Technician programming humanoid robot using a tablet in a workshop
(Image credit: Getty images)

If you’ve jumped onto the AI trend, then the chances are you’re either loving it and seeing the benefits or you fear it, concerned that robots are overtaking humans.

AI is certainly becoming smarter - the latest ChatGPT (GPT-4) even passes the bar exam for trainee lawyers - with flying colours. 

So, while I do not underestimate its power, should it ever be used to give financial advice?

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Can you really trust AI?

Let’s face it - financial advice has been somewhat of an elite club. If you have sufficient wealth, then the door to a financial adviser is open to you. If you just want to be better with money, get some investment advice or get your finances in order, then the chances are a financial adviser is probably not interested in talking to you (that’s without taking into account the hefty fees an advisor might charge). 

The fact remains, we have a financial advice gap in the UK and it is widening; most financial advisers look to speak to those with at least £150k to invest, meaning anyone below that threshold could be missing. 

Some providers, including robo advisers, have tried to fill the financial advice gap. Robo-platforms, for example, will help you get started with investing by taking you through a gamification process to help you determine how you should invest based on your risk attitude.

Some providers like BestInvest also sell packages showing you how to invest for your goals or carry out a portfolio health check for a set fee. 

And while this is a far cry from talking to someone on a regular basis to help build and maintain your wealth, tax planning and maintaining financial resilience, it is a start. These firms are doing a great job of making a dent in the financial advice gap.

Can AI take this a step further?

Can ChatGPT make you richer?

ChatGPT is a very powerful tool, and it could help you make better financial decisions.

However, it’s important to remember these tools are only experimental, and they’re still learning. 

So, while I’d be happy to use AI to fish out the best broadband deal or tell me if I'm overpaying for my mobile phone deal - it probably isn't a tool you’d use to give you guidance around inheritance tax planning or to tell you if consolidating your pension pots is a good idea. 

What’s more, individual circumstances are key and ChatGPT does not know anything about your personal financial situation. 

But if you do want to ask AI to give you a helping hand with your money, there are some things to keep in mind.

Pros and cons of AI financial advice

If you’re happy to trust a robot with your finances then there are some things you should consider.

  • Your feelings. It won't know how you're feeling, so while ChatGPT may be a whizz at throwing up numbers at you, it won't be able to give you that deeper understanding of your needs which can really matter when seeking help with your finances - in other words, the human touch
  • Think about the costs of wrong decisions - don't just rely on what AI says. For example, if you are thinking about retiring, the wrong decision on annuities or drawdown can be costly and make a big difference to your retirement pot. I would highly suggest speaking to someone about anything to do with big, life-changing, decisions
  • Sometimes you may get old or out-of-date information
  • You should always be cautious of sharing personal information with a bot - which could mean the ‘advice’ you get is not right for you.

Both Google and Open AI chatbots do flag the importance of seeking financial advice, stressing it is providing guidance only. But some users are unable to distinguish the difference and many overly rely on it as actual advice.

I am sure AI will improve and its use for financial advice will grow, but with the financial advice gap continuously getting wider, I fear many people may be forced to rely on a bot to see them through.

Kalpana Fitzpatrick

Kalpana is an award-winning journalist with extensive experience in financial journalism. She is also the author of Invest Now: The Simple Guide to Boosting Your Finances (Heligo) and children's money book Get to Know Money (DK Books). 

Her work includes writing for a number of media outlets, from national papers, magazines to books.

She has written for national papers and well-known women’s lifestyle and luxury titles. She was finance editor for Cosmopolitan, Good Housekeeping, Red and Prima.

She started her career at the Financial Times group, covering pensions and investments.

As a money expert, Kalpana is a regular guest on TV and radio – appearances include BBC One’s Morning Live, ITV’s Eat Well, Save Well, Sky News and more. She was also the resident money expert for the BBC Money 101 podcast .

Kalpana writes a monthly money column for Ideal Home and a weekly one for Woman magazine, alongside a monthly 'Ask Kalpana' column for Woman magazine.

Kalpana also often speaks at events. She is passionate about helping people be better with their money; her particular passion is to educate more people about getting started with investing the right way and promoting financial education.