Artificial intelligence (AI) has become ingrained in many aspects of our lives, including our financial lives. About two-thirds of Americans are already turning to generative AI for financial advice. However, among those who acted on the advice, 52% say it resulted in poor financial decisions or mistakes.

So, to what extent should you trust AI with your retirement and investment decisions? In this week’s Money Wisdom Question Series, Heath Grossman, CFP® explains how to take a balanced approach to using AI for personalized financial guidance.

AI Risks and Limitations

In general, AI tools can efficiently analyze large data sets, generate ideas, and support research. However, AI can also produce incomplete or biased information. AI tools cannot provide a single “right” answer for everyone, because each person brings different needs, perspectives, and experiences.

AI can also lack a degree of personalization. Financial planning is more than just analyzing numbers. A good financial planner will get to understand your personal financial goals, emotions, risk tolerance, and individual life circumstances.

Additionally, there are concerns about AI’s privacy and data security. Its complex systems and the sensitive data they manage can create a lack of transparency. This makes it difficult to verify the accuracy of every AI-generated response.

How to Use AI in a Smart, Balanced Way

We recommend using AI for lower-stakes tasks, such as summarizing information and gathering data. When conducting research, be sure to diversify your sources beyond AI and avoid relying on it alone. Also, remain vigilant against fraud, and ensure that you are using reputable, properly registered platforms.

Ultimately, AI lacks the empathy, emotional coaching, and ethical judgment that a human financial advisor can provide. That’s why you should consider using AI as a supplement to, not a replacement for, face-to-face financial planning advice.