for better and for worse – Winnipeg Free Press

Opinion

Financial advice at your fingertips is by no means a new innovation.

Yet with the rise of artificial intelligence, getting insights about your money has been taken to new heights of potential benefit — and dangers.

“There is a lot of upside to using AI, especially for budgeting, and it’s often good as a first draft for anything you want to do,” says Monisha Sharma, Toronto-based chief revenue officer at Fig Financial, which provides consolidation, home improvement and unsecured loans.

Fig has some insight on AI’s benefits. The fintech company leverages AI technology to make loans quickly to Canadians, but its use case is contained to Fig’s own specific data to ensure a low error rate.

When generative AI tools like ChatGPT are used by consumers to search for answers to their questions about personal finance, “it’s by no means perfect,” she adds.

Yet AI-driven insight and advice is likely to get much better in the years — maybe even months — to come. A 2024 study by MIT’s Laboratory for Financial Engineering suggests that AI already shows potential in providing good financial advice. Yet it still has challenges ensuring the advice is based on correct information.

Overall, the research points to how, with the right data and protective guardrails, generative AI could be pretty good at providing financial advice.

Just don’t blindly trust it. That said, blind trust in finance is a bad idea with human experts too.

By now, anyone who has used the AI tools — Google’s Gemini, Microsoft’s CoPilot, Perplexity, among many others — understands what a “hallucination” is. These fabricated errors produced from generative AI models range from rates of less than one per cent to close to 30 per cent, depending on the search engine, according to one study from early August.

When it comes to your money, a hallucination could prove costly.

“A lot of people focus on the pros and forget about the cons,” says Jessica Moorhouse, financial counsellor and bestselling author of Everything but money: The Hidden Barriers Between You and Financial Freedom in Toronto.

The stakes are higher with finances, more complicated and nuanced than, by comparison, meal planning, she adds.

“It’s unlikely that ChatGPT is going to give you a recipe that is super unhealthy, but when it comes to using AI for money management advice, you have to be cautious.”

That said, a lot of Canadians are using generative AI searches to provide them with money know-how. One BMO study from last year found that a third of respondents use it for their finances, though mostly for financial literacy, and the younger you are, the more likely you’re going to use it.

AI can be a truly valuable personal finance tool if you remember its limitations, says Christi Posner, a Winnipeg-based fintech strategist helping financial companies develop AI tools for personal finance.

“The beauty of gen-AI is that you can talk to it like you text a friend, and it turns complex topics into something you can understand fast,” she says, noting the algorithmically driven software “learns” from potentially hundreds of millions of documents on a variety of subjects that it can access.

It excels at building budgets, discovering savings and investing strategies, while explaining complex financial concepts in plain language. It can even tell you, based on your savings, age and forecast retirement date, whether you’re on track to reach your goal.

“AI makes money choices easier,” says the former debt counsellor, who understands well the impact of emotionally driven poor choices.

“From comparing mortgage options to meal planning, AI can simplify the hardest parts of money management.”

That includes helping individuals find the best deals on travel, which another recent study found.

The research by Adyen, a payment services provider, found a third of respondents are using it to help with travel decisions.

“We found it’s used mostly to build a personalized travel itinerary,” says Sander Meijers, Canada country manager at Adyen in Toronto.

He’s used it himself when on vacation for finding suitable activities for his kids.

“What might take me a couple of hours to plan, maybe, takes seconds.”

Still, the study found people still prefer the human touch — like getting one-the-ground advice from a hotel concierge.

Similarly, it’s difficult to replace the human mind and its ability for nuance required for personalized financial advice because of the emotions that often factor into them.

“It’s tempting to let AI figure it out for you, but financial planning has emotional and behavioural components that AI can’t handle,” Posner says.