AI financial advice has risks, top-ranked advisor says

Artificial intelligence is changing the way people gather information and make decisions, including on money matters.

In fact, recent reports suggest that generative AI, which could replace human analytical skills, is taking on the role of financial advisor for a significant number of adults.

Two-thirds, or 66%, of Americans who have used a GenAI tool such as OpenAI’s ChatGPT or Google’s Gemini said they used it for financial advice, according to a report published in September. Intuit Credit Mix. For Gen Z and Millennials, that share is much higher: 82% use it for everything from simple budgeting to more complex tax planning and investing.

“GenAI is a powerful tool for learning, planning and managing your money,” said Courtney Alev, consumer financial advocate for Intuit Credit Karma, in a statement. But “finance is nuanced and deeply personal,” he said.

“AI can give you an idea of ​​a safe withdrawal rate, but it ignores the personal and emotional part of it,” said Tim Lootens, managing director at Chilton Capital Management in Houston, ranked No. 34 on this year’s CNBC Financial Advisor 100 list.

Customers are increasingly checking the advice they receive against GenAI’s advice, Lootens said. But he said the advice they get from a tool like ChatGPT often brings up caveats, especially in complex financial planning scenarios.

For example, GenAI may recommend selling stocks at the end of the year and exchanging them for something similar to get a tax deduction and reap the supposed benefits.“The wash sale rule,” Lootens said. But if losses are minimal, he said, it may not make sense to sell some declining assets from your brokerage account. Or ChatGPT may recommend selling one stock in a portfolio of 30 to 40 stocks. In this case, “you can’t see the forest for the trees,” Lootens said.

While most clients continue to trust their advisors solely with AI tools, younger generations now prefer to work with advisors who use AI in their financial planning. Northwestern Mutual’s 2025 planning and progress study to create.

From predicting future trends to modeling financial scenarios, “it’s encouraging to see consumer responses to the use of AI in the financial services industry,” said Jeff Sippel, chief strategy officer at Northwestern Mutual.

For financial planners, “this is a defining moment that brings extraordinary promise as well as new responsibilities,” according to a report published in November CFP Boardis the credentialing organization behind the certified financial planner designation for financial advisors.

“How we adapt and leverage AI will determine whether the technology will enhance or replace the trusted space between financial planners and clients,” the CFP Board of Directors wrote in its study.

According to Kurt Cooperrider, an asset advisor at Chilton Capital Management, “If you want to compete with other firms, you should definitely embrace AI from an efficiency perspective.”

According to the CFP Board of Directors report, technological advances are rapidly reshaping the profession, “creating powerful opportunities to streamline tasks, expand access to guidance, and deliver more personalized customer experiences.”

Still, AI cannot replace a vetted financial advisor, according to the report: “Even as AI advances, the foundation of competent, ethical financial planning remains trusted human relationships between financial planners and their clients.”

Disclosure: CNBC does not receive any fee for placing financial advisory firms within our organization. Financial Advisor 100 list. Additionally, the inclusion of a firm or advisor in our ranking does not constitute an individual endorsement of any firm or advisor by CNBC.