Why AI advice may be unreliable in personal finance
Experts have warned against using artificial intelligence for financial guidance.
A recent survey indicated that nearly two-thirds of adults and more than 80% of Gen Z and millennials use generative AI chatbots as a source of financial advice, according to a news article from CNBC. Because of the technology’s tendency to introduce inaccuracies, biases and hallucinations, relying on generative AI chatbots to make financial decisions can come with risks.
In a study published in the Journal of Financial Planning, investigators examined whether seven generative AI chatbots could provide effective financial recommendations across several core planning domains — including emergency savings, asset allocation, investment portfolios and retirement withdrawals.
While the AI chatbots were capable of offering broad overviews of financial topics and principles, they were incapable of providing appropriate recommendations according to personal financial situations. Despite appearing confident and sounding authoritative, the AI tools were found to produce generic responses or variations based on prompt wording.
The investigators stressed that generative AI responses can be based on incorrect, incomplete or outdated information, creating limitations that can lead to poor financial strategies. Further, the tools are trained on data that may not represent certain individuals on the basis of their demographics, income levels or personal financial situations and habits and are dependent on how the prompts are framed, resulting in inequities and inconsistencies. The investigators also underscored that generative AI chatbots have no fiduciary responsibility to provide sound financial advice.
The experts concluded that individuals can use generative AI chatbots as a starting point when assessing financial matters but urged them to be cautious when considering its advice and seek professional guidance when making major financial decisions.
Read more: CNBC
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