With the rapid popularity of AI tools, I’ve seen the whole spectrum of reactions from friends and clients: fascinated, excited, hopeful, fearful, terrified, elated – you name it. Personally, I think the most helpful approach while we are still in the mid-to-early stages of this technology might be: curiosity.  

AI-powered financial tools can do some pretty neat things. They can quickly and accurately analyze vast amounts of data and automate time-consuming tasks that make our humans brains hurt. They also don’t ever need to go to bed, take a sick day, or pick up the kids – in other words, AI tools are available 24×7 and can offer an immediate response to any question you are asking. If you want to find out how much you should save to replace your income by age 65, for example, AI can easily give you that answer in less than a second.  

However, AI tools also have significant limitations in financial planning. The first and most obvious is that they are machines, not humans. They can (and have been known to) overlook nuanced financial situations and repercussions which require human judgment. Using the previous example, if you want to retire at age 65 but your spouse has other plans in mind, AI isn’t going to point that out to you, nor is it going to help guide you both to a mutually agreeable solution. You need a human to help orchestrate that.  

Some people also forget that using AI, especially “open AI” like ChatGPT, can carry a significant amount of security risk, not to mention privacy concerns. In other words, if you put personal financial details into ChatGPT, guess what. It will use that to “learn” and it may spit your data back out to someone else as an answer to a prompt. Using “closed AI” can help to address this concern, but there are other issues with using an AI platform that is “closed.” By its very nature, a closed platform may offer more limited insights due to operating in a closed system with more limited data to access when forming an answer for you.  

Whether you’re using a closed or an open platform, though, AI is a machine. It lacks human interaction and empathy, which might not matter for calculations, but which are powerful tools for understanding the nuances of your financial goals and motivators. In other words, you can have a perfect financial plan laid out for you, but if you haven’t tapped into your true motivators, your reasons WHY you are doing this in the first place, then it’s likely you’ll have trouble sticking to your perfect plan when the going gets tough. A good (human) financial advisor can help you get through personal challenges and remind you of your bigger “why.”  

One of AI’s most powerful attributes can also be a downside: its ability to quickly answer anything you ask it. It can provide answers, but AI can’t “read between the lines” and ask you clarifying questions about why you are asking about this in the first place, and it can’t share its experience about where this kind of thinking can lead you. A human advisor who asks thoughtful follow-up questions might be able to steer you towards a more helpful path in the long run, rather than just answering what you ask.  

Of course, both machines and humans can have potential biases that can slant the advice that is provided. Personally, I don’t see that as something to stop you from using either; but instead, something to be aware of when considering the advice that you are given. If the advice is from a person, ask what their motives are. Are they offering wisdom learned from experience? Or suggestions fueled by sales quotas?  

If the advice is from AI, ask where this information may be coming from, as well. Remember that AI is likely drawing from thousands of comments and suggestions already buzzing around the internet, some great and some not so great. Is the advice a generalized observation that is popular on social media, for example? Is it sound advice (does it make sense)? Does it really apply to you and your personal circumstances? AI by its very nature tends to be generalist. If you need help in a specialized area, you might consider asking someone who has experience and training in that particular area.  

Ultimately, I think whether you hire a financial planner or use AI for financial advice depends on both the problems you are trying to solve and your individual preferences. For many, it comes down to a matter of trust.  

I was recently talking to a young college student who observed that some people (he mentioned his grandparents) will NEVER trust a computer or technology to give them reliable advice, because the machine seems too fallible. While others (he mentioned his high school friends) will ONLY trust a computer or technology to give them reliable advice, because the human seems too fallible.  

Most of us fall somewhere in between: aware that humans can make math errors, but also that machines can’t give you a hug when you need it.  

So maybe a balanced approach is to use a combination of AI and humans.  

AI can complement human advisors by handling routine tasks in no time at all. It can provide valuable data-driven insights that a human could miss. By using AI for these areas, human advisors can be freed up to focus on the human aspects of the financial picture: relationships, emotions, and motivation to help you move forward.  

After all, understanding is the cornerstone to improving your financial world. Whether you gain that understanding from a human, AI, or both, is up to you.