Internet artificial intelligence tools have exploded in popularity in recent years. From drafting emails to answering trivia questions, AI software has quickly become a go-to resource for many Canadians. I am personally iffy on seriously using AI in any activity. I believe it is in its infancy, it can easily be shown that AI information is inaccurate, and that it is too readily accepted as factually based. I can’t ignore its impact on our clients in their use in their life planning.
As these tools become more sophisticated, some consumers are turning to them for something far more complex: financial planning advice. While the appeal of instant, free answers is obvious, relying on AI for money decisions can be risky. And in some cases, dangerous to your financial wellbeing. I thought I would create a simple case study.
Interactive question proposed
Let me give you an example. I put the following question into ChatGPT to see what it would tell me to do:
- I am 55 years old and plan to retire in five more years.
- I have a mortgage balance of $400K on my $1M home, and
- I have $300K saved for retirement in my RRSP with no other savings.
I just inherited $400K and am wondering what I should do with that money to get myself in the best shape for retirement?
The response I got was:
Given you only have $300K saved for retirement and five years to go, you need to grow your investments but also reduce mortgage risk. Here’s a practical mix:
- Contribute $200K to your RRSP and apply the tax refund to your mortgage.
- Put $100K toward the mortgage directly.
- Put $100K into a TFSA (if you have room) for flexible retirement funds.
That way:
- Your retirement savings jump from $300K to $500K.
- You cut down your mortgage meaningfully.
- You create both registered and non-registered flexibility.
Dig a little deeper
While that may seem like a comprehensive answer and may even be a reasonable recommendation, how do I know if this is the right plan? It never asked me if I had any other debt, such as $30K sitting on a credit card accruing interest at 22%, or if I had a pension at work that would fully cover my retirement income needs.
AI lacks the full picture. A cornerstone of good financial planning is context. A financial life planner considers your income, debt, family situation, retirement goals, risk tolerance, tax implications, and countless other variables before offering guidance. AI software, however, only knows what you tell it in a single conversation. If you leave out critical details, or don’t even know which details are important, AI can only provide partial or generic advice.
Without knowing your full financial picture. Your tax bracket, interest rates, retirement savings, family needs, or long-term goals. The AI induced answer may not be the right one for you. Following incomplete advice could cost you a significant portion of your potential wealth over time.
The Illusion of authority, one of the biggest dangers of AI is that it sounds confident. Even when an answer is oversimplified, incomplete or just plain wrong, AI tools present the information in a polished, authoritative way. This can make it difficult for consumers to distinguish between reliable advice and potentially harmful guidance.
Financial planning is rarely black and white. What seems like a simple question, should I invest in RRSPs or TFSAs or should I lease or buy a car, depends on dozens of personal factors. AI may give you a generic answer that seems sensible, but if it doesn’t reflect your unique situation, it can lead you down the wrong path.
No AI accountability. Another important consideration is accountability. When you work with a financial life planner, you’re working with someone who must meet professional standards, adhere to a code of ethics, and act in your best interest. If they make a mistake, you have recourse. With AI, there’s no such safety net. The software doesn’t take responsibility for the outcomes of its answers, and if you lose money because you followed its guidance, you’re on your own.
AI usefulness
AI can still be helpful if used wisely. This isn’t to say AI has no role in your financial life. AI tools can help you understand concepts, provide quick definitions, or even summarize complex financial topics in plain language. Used this way, AI can empower you to ask better questions when meeting with a financial professional.
The bottomline
When it comes to actual decision-making, especially on big-ticket issues like retirement planning, tax strategies, or managing debt, there’s no substitute for personalized advice. Your financial situation is as unique as your fingerprint, and only a qualified financial life planner can provide recommendations that truly fit your needs.
AI may be a powerful tool but it’s not a professional financial planner. Canadians who rely too heavily on AI-generated advice risk making decisions without all the necessary information, leaving their long-term financial health at stake.
Use AI to learn but when it comes to acting on advice, always consult with a professional who understands you, your goals, and your entire financial picture through the lens of Keeping Life Current.
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