The Rise of AI in Financial Advice
Historically, financial advice was considered a luxury for the wealthy. However, with the advent of Artificial Intelligence (AI), this notion may soon change. The World Economic Forum (WEF) suggests that AI could make financial advice accessible to almost everyone, providing more personalized information on saving and investing for the future.
Benefits of AI in Financial Planning
One significant advantage of AI as a financial advisor is the creation of a robust and meaningful financial plan. This could bring equity, as people would no longer assume the worst-case scenario for retirement, such as the world ending.
The Importance of Financial Control
Financial planning is crucial for personal finances, not just for setting short-term, medium-term, and long-term goals but also for gaining control over income, debts, and savings levels.
In Mexico, formal financial education is lacking; most learn through trial and error. Having a financial guide could make a significant difference, regardless of the issue of low wages.
The first step towards a financially planned future is budgeting, yet many Mexicans do not create or understand how to make one. According to the National Financial Health Survey 2024 by the National Institute of Statistics and Geography (Inegi), only 53.2% of the population keeps any form of expense tracking, with women (54.4%) being more likely than men (51.8%).
What if AI, with just basic data input, could enable the other half of the population to track expenses, create a budget, and gain control over their finances?
Risks Associated with AI Financial Assistance
Antonio Ceballos, a personal finance specialist, explains that while AI can analyze bank accounts, predict expenses, and suggest cost-cutting or investment options, it’s essential to remember that AI has biases.
AI learns from historical data, which may reflect existing biases, such as gender or racial wage gaps. Consequently, AI recommendations could perpetuate these biases, suggesting more conservative investments for women or minorities based on historical data reflecting limited opportunities for them.
Moreover, AI lacks the ability to understand emotional nuances, unforeseen personal circumstances, or non-quantifiable goals that a human advisor can grasp.
Unforeseen events like divorce, severe illness, or the desire to support a family member can drastically alter an individual’s financial situation, requiring a nuanced approach that AI might overlook.
AI as a Transformative Force
Despite these risks, AI can be a transformative force in personal finance when used correctly. It can help individuals meet immediate needs like rent, food, fuel, and healthcare costs, as well as long-term goals such as retirement savings and homeownership.
The value of AI in personal finance lies in its potential to complement, rather than replace, human intelligence.
Users must be aware of both the benefits and potential biases when considering an AI-driven financial advisor.
Key Questions and Answers
- What is the potential of AI in financial advice? AI can analyze bank accounts, predict expenses, suggest cost-cutting or investment options, and potentially make financial advice accessible to almost everyone.
- What are the benefits of AI in financial planning? AI can help create a robust and meaningful financial plan, bringing equity and addressing the assumption that retirement planning is only about waiting for the world to end.
- What are the risks of relying on AI for financial advice? AI has biases learned from historical data, which could perpetuate existing inequalities. It also lacks the ability to understand emotional nuances or unforeseen personal circumstances.
- How can AI be effectively used in personal finance? AI should complement, not replace, human intelligence in personal finance. Users must be aware of both the benefits and potential biases.
