Technology is constantly transforming society. In the years to come, we are expected to witness significant changes beyond a shadow of doubt. Artificial intelligence (AI), though not a recent innovation, is taking the world by storm because it is able to perform roles in a few minutes which we take a few hours to finish.
AI is predominant in every sector, and finance is no exception. There are various AI-powered tools that people use in order to seek financial advice. They are also dependent on them for budgeting and money-growing tips. The fact is that AI is not completely developed. Loads of data are to be fed to AI tools in order to enable them to work efficiently.
Nowadays, many people are relying on AI tools in order to seek financial advice. Unfortunately, this is not a good move. If you are acting upon AI advice, you will likely end up taking a toll on your financial condition. This is because AI may not be able to correct advice. It is subject to biases, too.
Why should you rely less on AI for financial advice?
Here are the risks you will likely experience if you rely on AI for financial advice.
AI has no intelligence
One of the biggest problems with AI is that it does not have intelligence. AI tools respond based on the data they are fed. For instance, when you talk to a Chatbot to inquire about a product or to make a query, it answers correctly if it is well trained, but as soon as it comes across a new or unfamiliar question, it eventually becomes confused and closes a ticket after making an abrupt response.
Artificial intelligence cannot beat human intelligence. In real life, millions of people fit into different situations. In order to feed data to AI tools to make them potent to assess the overall financial condition of an individual, it will take several decades, and by the time a perfect AI model is presented, unique financial circumstances will have come to notice.
AI systems provide information based on the data they are fed. They do not have the potential to assess a particular situation on their own. Therefore, if they come across something which does not relate to their data, they do not respond. AI tools cannot be reliable when you have to receive financial advice.
Most of the AI tools are biased. They are trained to assume that people with strong financial conditions can take on greater risks, while people with less money may lose all of their money by investing it. These biased opinions may restrict you from investing your money or investing in the wrong assets. As a result, you start to struggle with your financial condition. Eventually, you will see that you have lost your money.
AI tools are not smart enough to carefully assess your financial circumstances, and therefore, their advice cannot be considered seriously.
AI does not follow financial regulations
When you take advice from a financial expert or financial service company, you are more likely to receive genuine advice. They are regulated by the FCA, so they will advise keeping your interests protected.
For instance, if you are to take out loans for bad credit with an instant approval, they will review your credit report and income sources. If they find that your financial condition is not strong enough, they will likely lend you less money or repudiate your application. They will ensure that you do not end up borrowing more than you can afford. However, if you rely on AI tools, they do not use a holistic approach.
They will make a decision based on how much you are left with after your regular expenses. If your incomings are greater than outgoings, you will naturally be approved, but AI cannot anticipate how likely your financial condition will be when you lose your job, for example.
If a lender fails to offer you good advice or you find that they have made the decision in order to protect their self-interest, you can make a complaint to the Financial Ombudsman Service against that lender, but it is impossible to do the same against AI tools. You will be held responsible if you struggle after acting upon AI advice.
Your data may not be secure
In order to get meaningful advice from AI tools, you have to share your sensitive information. Not only your contact details, but your financial details will be shared with AI too. Not all platforms are built with strong privacy, and therefore, your crucial data is often compromised. You could be vulnerable to privacy breaches, data misuse, and even hacking, especially if your system is not secured.
Financial planners, on the other hand, also collect sensitive data from you, and they cannot promise that your personal information will not be compromised, but they are regulated by the FCA. They are more likely to keep your information secure than AI networks. Further, AI platforms are not subject to the same standards.
AI makes mistakes, too
AI is often advertised as “the perfect.” You are often told that AI never makes a mistake. They can easily detect an object and prevent you from a fatal accident, for example. Likewise, AI in the financial industry carefully considers all aspects of your financial life and then makes a decision. But these claims do not seem to be true. Do not assume that AI cannot make a mistake. AI is biased. When it sees that your financial condition is better, it might be more flexible, even though your financial problems escalate due to that much flexibility.
For instance, if you are to take out urgent loans for the unemployed, AI will fail to differentiate between savings and passive income sources. It will club all monetary resources you have and then recommend these loans to you. However, when you put in the application to a direct lender, they know that you have to discharge the debt only from your passive income. You cannot use savings. As a result, they will most likely cast aside your application. So, you should be careful while trusting suggestions from AI.
AI lacks emotional intelligence
No matter how well-trained an AI model is, it lacks emotional intelligence. Sometimes, financial decisions are made based on emotions. For instance, you will have to evaluate the impact of divorce, changing your career, etc. There are situations when patience is a virtue. However, if you rely on AI for any advice, you will be given some suggestions that would take a toll on your finances.
For instance, if you have invested some money in the market, which is down at the moment. AI would anticipate the market condition based on fed trends and most likely ask you to sell it, but it could prove to be a major loss when the prices triple in the coming months.
The bottom line
AI could be good for general advice, such as budgeting and saving, but you rely on financial experts when it comes to making decisions about investment, borrowing, etc. AI is subject to a lot of risks that cannot be overcome. Human intelligence has a stronger and more positive impact than artificial intelligence.
