AI has changed how people access financial information and many tools explain concepts and give immediate answers to your questions. The reality however is there are critical gaps in what AI tells you and these gaps can cost you money. Here we outline the risks of turning to AI instead of a financial adviser.
What are the big things AI misses?
-It gives general advice but does not understand your full financial situation
-AI often does not apply up to date tax rules
-It does not account for goals, behaviour or risk tolerance
-It takes no responsibility for the outcomes
These are gaps that professional advice can fill.
Your personal circumstances are not fully understood
AI responds only to the information that you input, It will not know;
-Your full income, your total household income
– Your existing assets and liabilities
-Your relationship status
-Your attitude to investment risk
-Your experience level regarding investments
Small details can make a big difference. For example two people aged 40 with £20,000 to invest could have vastly different views, goals and objectives for that investment. AI will not differentiate between the two people.
Tax can be taxing
AI often misunderstands tax rules in the UK. It can use outdated thresholds, miss interactions between tax rules and crucially it can oversimplify very complex scenarios.
A misunderstanding of tax can be a costly mistake. Here at Bentley IFA we take time to considers your full tax position, your use of available wrappers and look to create a long term strategy in the most tax efficient way.
Mis-judging risk can be risky
Chat GPT and other AI providers do not do a full analysis of your risk profile. Take time to consider their recommendation and how you would react if the investment lost value
-Would I panic and sell?
-Can I afford to lose money on this investment?
-Do I need access to these funds in the next 5 years?
-What is my emotional response to losing money on this investment?
No accountability
The lack of accountability is a big issue with AI. It will not answer the questions that you should have asked. It will only answer what you did ask. As such it will not be accountable for any wrong information provided. As independent financial advisers we:
-Regularly review your financial plan to ensure that it remains suitable for yourself
-Check for any changes in circumstances. Peoples lives change all the time and an investment that was appropriate 12 months ago may not now be as appropriate
-Are accountable for the advice given and are regulated by the Financial Conduct Authority
Summary of the common mistakes AI users make
These are common mistakes made by AI users
-Reliance on a single answer without context
-Assumption that general advice applies to them
-Missing tax implications
-Overlooking long term consequences
To conclude
AI tools can be and are very beneficial but time is needed to considered what is being input and the relevance of the answers to your specific and unique situation. This is where a financial adviser who provides strategy, context and accountability can be of real long term value.
If this sounds like something you would like to discuss in more detail please get in touch with Dan who would be happy to help you either by phone 01746 767682 or email [email protected]