Financial planning can feel like an overwhelming enterprise to undertake for your own finances. Do you hire someone and pay a fee or do you take advantage of free or low-cost tools, like artificial intelligence (AI)?
While AI can certainly help with some steps in figuring out your finances, according to Britta Ferguson, CFP, senior vice president and a financial advisor with Wealth Enhancement Group, it may be missing a lot of nuance that a human planner can bring.
Ferguson explained some of the reasons why you shouldn’t rely upon an AI financial planner in the long run.
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If You Want That Human Touch
While AI algorithms may be based on human input, Ferguson pointed out that what AI delivers is often a generic form of information that isn’t uniquely tuned to the client. “When it comes to financial planning, every person’s situation is different and unique. Their concerns, their goals, their wants, their needs when they start the meeting oftentimes will continue to evolve into something maybe a little bit deeper,” she explained.
Money is also an emotional and psychological topic, she said, and AI is probably not capable of asking those deeper questions to be able to also make sure that it’s addressing the psychology behind the finances.
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If You Want a Personalized Financial Planning Experience
A human financial planner has the ability to “pivot and adapt” to a client’s needs, Ferguson said. While AI may set out to solve a query or question, only a person can bring that added layer of emotion and customization. “I don’t believe AI will be able to adapt to be specific enough to help a person maybe emotionally get to their [outcome],” she said.
Human planners, on the other hand, not only input data, but ask questions of the client, such as what they are comfortable with, their risk tolerance, their personal goals and so on. A human can tell what another human really cares about.
“I’m sure AI can also be customized in that regard, but what AI is not going to be able to provide to somebody is when you have a big market correction, how do you make sure your client doesn’t sell out of the market? How do you make sure that your client is comfortably sleeping at night based on the decisions that they made? How do you make sure that your client really truly feels confident stepping into retirement?”
Ferguson feels those kinds of questions may be out of the realm of AI’s capabilities.
If You Want Accountability
Another very important function that any certified financial planner of the human variety brings is a level of accountability to the client. “I’m held to a fiduciary standard and I’m legally required to put my client’s best interest first. With AI, what oversight do they have? What legal standard are they held to?” Ferguson asked.
She said that AI financial planners may be useful for someone who is just starting out and wants to get a general idea of their finances, but for more complicated issues, they may not be a great fit.
If You Want Customizations
If you are looking for customized planning, estate planning, retirement planning and/or income planning, Ferguson said AI is unlikely to understand the way all of those things work together.
“I don’t think AI will ever be capable to understand all that if this, then that and make sure that not only am I taking your personal goals, your personality preferences and what’s keeping you up at night [into account], but able to say: Based on all of these human factors as an individual, these are the steps that you will take.”
If You Want Trusted Experience
While every human financial planner may have varying degrees of experience, Ferguson pointed out that with AI, you don’t know how it’s programmed or by whom.
Plus, she said, “No matter what it’s going to be based on historical data to create its advice. If your situation is changing, if laws are changing, if the market is changing, if there [are] real-time changes, how quickly is AI going to be able to incorporate that versus you give your financial planner a call?”
If You Want To Trust the Advice You Receive
While Ferguson acknowledged that AI is likely here to stay and has its uses in financial planning, you must be careful not to trust every bit of information it produces and to get a second opinion and fact-check it before making any action based on its advice. If you don’t know where its algorithms draw their information, you can’t guarantee the advice.
If You Want It To Care About Your Specific Finances
Most importantly, Ferguson said, if you want someone to not only care about your finances but your holistic financial picture and how it affects you, using AI is probably not the right move.
“As a financial planner, I make sure to execute plans, to make sure we are on track,” she said. It’s unlikely that your AI planner is going to call and set setting up check-in and appointments with you, much less be proactive in things like your end-of-year tax planning or whether your estate plan is put together.
While there’s no harm in dabbling in AI to get a feel for certain financial moves or possibilities, a human financial planner will be the best bet if the above are things you want for your own finances.
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This article originally appeared on GOBankingRates.com: I’m a Financial Planner: 7 Reasons You Should Not Use an AI Financial Planner
