Artificial Intelligence (AI), like ChatGPT, has revolutionized a variety of industries, and personal finance is surprisingly among them. Questions have come in droves regarding how best to use it to help pick stocks, predict recessions, and budget accordingly. But can one entirely rely on AI to keep them financially secure and ensure a comfortable retirement? The short answer: no. However, there are some benefits. One just needs to be aware of the dos and don’ts when using AI for financial advice, including the below:
1. Understand the Limitations and Potential Biases of AI for financial advice:
A.I. models are only as good as the data they are trained on. Therefore, it’s essential to understand the limitations and potential biases of the A.I. model being used. Before relying on A.I. for financial advice, you should ensure that the data used to train the model is representative of the population being served. This can help prevent inaccuracies and unfair recommendations, as everyone’s financial security varies based on location, occupation, age, etc. Does the model you are using aggregate data from a similar demographic?
2. Use AI as a Tool to Assist in Decision-Making:
While A.I. models can provide valuable insights and recommendations, they should not replace human expertise and judgment entirely; but rather used as a tool to assist in decision-making, providing additional information that human experts may not have considered. This can help to improve the quality of financial advice.
3. Ensure the AI Model has been Thoroughly Tested and Validated:
It’s important to ensure that the A.I. model has been thoroughly tested and validated before using it for financial advice. This includes testing the model on a variety of data sets and scenarios to ensure that it performs accurately and reliably. Thorough testing can help to prevent inaccurate recommendations and improve the overall performance of the A.I. model.
4. Monitor the Performance of the AI Model Before Taking Its Advice:
The performance of an A.I. model can change over time. Therefore, it’s essential to monitor the performance of the A.I. model regularly and make adjustments to your queries as necessary. This can help to ensure that the A.I. model continues to provide accurate and relevant financial advice.
5. Ensure that the AI Model is Transparent, Ethical and Explainable:
The transparency and ethics of an A.I. model are essential for building trust and reliability. It’s important to ensure that the A.I. model used for financial advice is transparent, uses words you can understand (rather than industry jargon) and provides ethical feedback without discriminatory outcomes. and explainable so that clients can understand how it arrived at its recommendations.
While A.I. is indeed a powerful tool for financial advice and planning, it’s essential to understand its limitations, monitor its performance, and ensure that it’s used ethically and transparently. By following the do’s and don’ts outlined in this article, you can make the most of A.I. for your financial future.
Author: Keith Dorson is the owner of Wise World Investment Planning, located in Chandler, Arizona, where he brings his 25 years of experience to help his clients plan their financial future. Their firm works alongside legal and tax advisors to assist with estate planning, tax planning, risk management and investment planning. For more information, visit www.wiseworldinvestment.com.
