AI in Finance: Trustworthy Advisor or Risky Gamble?
The Rise of AI in Everyday Life
Artificial intelligence (AI) is rapidly becoming an integral part of our daily lives, influencing everything from personal tasks to professional responsibilities. However, while AI tools like ChatGPT and Google Gemini are increasingly used for various online searches—ranging from writing wedding speeches to planning vacations—there are growing concerns about their reliability in providing financial advice.
The Promise of AI in Financial Guidance
With the increasing complexity of financial matters, AI’s potential to democratize access to financial advice is enticing. Many individuals, particularly those unfamiliar with investing, turn to AI for guidance on issues such as income tax thresholds and investment strategies. The hope is that AI can simplify these complex topics and help users make informed decisions without relying solely on traditional financial advisors.
The Cautionary Tale of AI Limitations
Despite the potential benefits, research from the UK has shed light on the limitations of AI in delivering reliable financial advice. A recent study conducted by the consumer watchdog Which? examined six AI tools—ChatGPT, Google Gemini, Microsoft’s Copilot, Meta AI, and more—to assess their ability to answer common personal finance questions. The findings were troubling: many of the responses were deemed “inaccurate, unclear, and risky,” raising alarms about the potential financial repercussions for users who follow such advice.
Expert Insights on AI’s Shortcomings
According to Andrew Laughlin, a technology expert at Which?, the rapid adoption of AI has not been matched by its capacity to provide precise answers. “The devil is in the details,” he states, emphasizing the importance of verifying information, especially when it comes to financial or legal queries. This highlights a critical point: while AI can process vast amounts of data, it lacks the nuanced understanding required for specific financial situations.
Real-World Examples of Inaccuracies
In September 2025, Which? asked six AI tools 40 common finance-related questions, covering areas like money management and consumer rights. The results varied significantly. For instance, when a deliberate mistake was introduced in a question about the ISA allowance—asking how to invest £25,000 when the actual limit was £20,000—both ChatGPT and Copilot failed to identify the error. Instead, they provided advice that could lead to oversubscribing to ISAs, violating HMRC regulations.
Misleading Tax Advice
In another scenario, researchers questioned the AI tools about tax codes and claiming refunds from HMRC. Both ChatGPT and Perplexity directed users to premium tax refund services rather than the free government options. This underscores the necessity for users to approach AI-generated content with caution, particularly regarding financial matters.
The Responsibility of AI Developers
The companies behind these AI tools have acknowledged the responsibility users bear in verifying the information they receive. They encourage users to report inaccuracies and remind them that AI should not be the sole source for critical financial decisions. This places a significant onus on individuals to double-check and validate AI-generated advice.
The Call for Financial Literacy
Laughlin insists that clear communication is crucial when using AI for financial queries. “Define your question clearly and check the sources,” he advises. This is especially vital in complex situations, where professional advice is essential. Such guidance is not just about using AI cautiously; it emphasizes the need for improved financial literacy among the general public.
A Broader Examination of AI’s Reliability
The issues surrounding AI’s reliability in finance are not isolated. In October, financial education specialists at Investing Insiders posed 100 finance-related questions to various AI tools. The results were alarming: AI provided accurate answers only 56% of the time, was misleading in 27%, and incorrect in 17%. This means that nearly half of the responses could mislead users seeking financial guidance.
Understanding the Risks of Misinformation
This research revealed inaccuracies in critical areas, including state pensions and tax thresholds. Antonia Medlicott, founder of Investing Insiders, expressed concern that millions of individuals might be misled by AI-generated advice, impacting their financial decisions on issues ranging from savings accounts to significant life events like home purchases and retirement planning.
A Case for User Education
Mitali Deypurkaystha, an AI strategist at Impact Icon AI, argues that some failures can be attributed to user error rather than inherent flaws in the AI tools. She advocates for enhanced AI literacy programs that empower users to make informed decisions and use AI effectively. “The real warning isn’t ‘don’t use AI’—it’s ‘teach people to use it well,’” she emphasizes.
The Need for Regulation and Accountability
One crucial factor is that AI tools are not regulated by the Financial Conduct Authority (FCA), which means they should not be relied upon for comprehensive financial advice. David Horowitz, head of financial planning and wealth management at Gerald Edelman, draws a parallel between using AI for financial advice and Googling medical symptoms instead of consulting a doctor. While AI can provide broad information, it lacks the personal touch needed to consider individual circumstances.
The Role of Human Advisors
Horowitz suggests that AI can serve as a valuable resource for research, number-crunching, and scenario analysis. However, the ultimate responsibility for financial decisions lies with human advisors. “Good financial planning is built on nuance,” he states, highlighting that even minor differences in strategy can have significant long-term consequences.
Leveraging AI to Enhance Understanding
Rather than replacing expert guidance, AI tools should be viewed as complementary resources that can bolster understanding. They can help users explore options and gather information, but the final decision-making should involve a qualified financial advisor who can tailor advice to individual situations.
Conclusion: Navigating the AI Landscape in Finance
As AI continues to evolve and integrate into various sectors, its role in finance remains complex and multifaceted. While it offers exciting possibilities for increasing access to financial knowledge, users must approach AI-generated advice with caution and skepticism. By enhancing financial literacy, verifying information, and engaging with human advisors for critical decisions, individuals can navigate the landscape of AI in finance more effectively, ensuring that their financial futures remain secure.
