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Would You Trust a Financial Advisor Powered by Artificial Intelligence?

Would You Trust a Financial Advisor Powered by Artificial Intelligence?If you’re looking for financial advice, there’s no shortage of options. The world is full of professional “gurus” who combine their training, experience and gut instincts to help you make sound financial decisions about the future. 

These financial advisors are experts at crunching data and studying numbers. But artificial intelligence (AI) has the potential to be even more accurate than their human counterparts. It can handle much more data and crunch numbers much faster, all without “instincts” playing a part. 

Should you hand over your family’s financial future to a robot? Believe it or not, this isn’t some hypothetical question. 

Billed as the “world’s first (AI) financial advisor,” Pefin is already making wildly accurate predictions about investing and retirement. Although this artificial intelligence platform is still in its early stages, the machine-learning prototype could soon revolutionize the world of finance and banking. 

Is this trend toward AI financial advice a good thing or a bad one? 

Let’s take a look. 

The Pros of Having an AI Financial Advisor

As mentioned, the primary selling point of AI technology is accuracy. Through iterative learning, pattern recognition and access to reams of historical data, artificial intelligence can whip up predictions that would take humans many years to formulate. 

In theory, the machines of tomorrow will be faster, stronger and more accurate. However, the benefits don’t stop there. 

1. AI Financial Advice Is Cheaper

By some estimates, the Pefin AI platform costs 1/20 of a traditional human advisor — that’s with today’s technology. Prices figure to go down as the tech improves and adoption of AI financial advice becomes more mainstream. 

2. AI Financial Advice Is Scalable

Your financial advisor, Bob, can meet with only one person at a time. By contrast, an AI platform could theoretically service the needs of the entire world — at the same time. 

3. AI Financial Advice Is Always Available

To meet with Bob, you’ve got to schedule an appointment. Plus, his “expert” knowledge is only as current as his last check-in with whatever new sources or charts he uses. 

An AI advisor is available 24/7, and its insights benefit from the most up-to-date data possible. It could even, theoretically, use information that hasn’t been published yet in major news sources. 

4. AI Financial Advice Is Centralized

Bob might be an expert in SEP IRAs. If you want help with Roth IRAs, you’ve got to talk to Sarah. If you’re thinking about retiring in Spain, for example, that’s a separate department altogether. 

With AI technology, however, you can tackle all of these functions with one centralized dashboard. With the right approach, an artificially intelligent financial advisor can be an expert in all things. 

5. AI Financial Advice Is Impartial (Maybe)

Financial advisors have a fiduciary duty to act in their clients’ best interests. With human actors, this is hard to monitor or enforce. Bad advice might come from faulty assumptions, but it could also come from profit-making motivations that benefit the advisor. 

This isn’t to say that AI can’t act independently, or per the malicious instructions of the original programmer. But on the surface, machines seem more impartial than humans. 

The above are all compelling reasons for why it makes sense to hand over our finances to robots, but there are potential downsides of AI technology. 

The Cons of Having an AI Financial Advisor

The most obvious downside of AI technology is that these predictive powers can be considered a scam. If you had a forecasting machine that could outperform humans, why would you share this technology with the world? Wouldn’t using this platform for yourself be more profitable than charging for access? 

Even if we could be 100 percent certain this technology is legitimate, more questions arise. For example, how do you offer unique financial advice if everyone has the same access to the same number-crunching capabilities? After all, the stock market must have winners and losers. That becomes much harder if everyone buys shares of Company X at the same time. 

One way to resolve this would be to offer tiered services. Those who pay more would receive faster access or more accurate predictions. Even so, there are other potential downsides of adopting AI technology across the board. 

1. The Risk of Hacking

Artificial intelligence uses binary numbers — 1s and 0s — making it potentially susceptible to hacking. One could program machines to recommend bad stocks, or one could theoretically feed the AI platform bad information in the form of “fake news.” 

This danger exists for human advisors as well. However, the scale of misinformation is far more limited since a person can read only so many stories at a time. Humans can also use gut instincts and common sense to weed out real headlines from the fake headlines. 

2. The Risk of Black Box Thinking

Machine learning is incredibly powerful, but poorly understood: 

  • We know the information that goes in.
  • We know the predictions that come out. 

What happens in between, however, is a mystery. Thus, you’re essentially throwing money into a “wishing well” and blindly hoping for the best. There are a lot of people who find this idea off-putting. 

3. The Risk of AI Overlords

With enough improvements, AI could theoretically begin acting on its own — creating entirely new (and unforeseen) directives. This danger is the subject of many Hollywood plots, some of which are exaggerated for dramatic effect — but the possibility exists. 

If artificial intelligence does take over, however, your Roth IRA will probably be the last thing on your mind. There will be much bigger things to worry about — for all of us. 

Would You Trust an AI Financial Advisor?

It could be a scam. It could be a game-changer. Or it could be a disaster waiting to happen. Only time will tell. And you could be forgiven for waiting on the sidelines. 

Then again, if your friends, family members and competitors all begin making money thanks to their AI financial advisors, you might not have a choice. 

Learn more about BluePay today! 

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