AI Doesn’t know You, But It’s Advising You Anyway

Artificial intelligence has quickly become a popular source of financial guidance, with tools like ChatGPT, Microsoft Copilot, and Google Gemini increasingly used for budgeting, investing, tax questions, and retirement planning, especially among younger generations.

The appeal is understandable: AI is fast, free, nonjudgmental, and available 24/7, and in just a few years it has gone from a novelty to being treated by many as an authority on personal finance. However, research and real-world experience show that relying on AI for financial advice can carry serious and sometimes costly risks.

Multiple studies find that AI systems frequently produce inaccurate or misleading information. One major analysis found that nearly 45 percent of AI-generated answers contained significant errors, outdated details, or fabricated information known as “hallucinations,” while other research shows AI-powered search tools return incorrect answers in up to 60 percent of queries. These issues are not rare glitches but structural limitations of large language models, which generate responses based on probability and patterns rather than verified, real-time facts.

When these errors affect financial decisions, the consequences can be immediate. A survey by Pearl.com found that about one in five people (27 percent among Gen Z users) who followed AI-generated financial advice lost at least $100. While that amount may seem modest, it reflects a broader pattern. In multiple studies, more than half of users  reported making a poor financial decision after acting on AI advice, including mistimed investments, flawed debt strategies, unexpected tax bills, and compliance mistakes.

Real-world examples reinforce these findings. Wealth Strategies Journal reported on a user who turned to ChatGPT to learn stock trading; although he initially made a profitable trade, he later lost money because the AI relied on outdated market data. This highlights a critical weakness of general-purpose AI tools: they cannot reliably access real-time financial information or adapt to rapidly changing markets.

Several structural issues explain why AI advice can be risky. Hallucinations allow AI to confidently present  incorrect information as fact, while generic, one-size-fits-all guidance fails to account for individual income, tax situations, risk tolerance, time horizons, or         emotional factors. Additionally, AI lacks emotional   intelligence and accountability, important elements in financial decision-making, especially during periods of market volatility.

There is also a behavioral risk. Many people turn to AI to avoid the embarrassment of asking “basic" financial questions, which can encourage learning but may also lead users to bypass qualified professionals and place undue trust in a tool never designed to manage real financial risk.

Financial professionals widely agree that while AI can be a helpful educational tool, it is not a replacement for human judgment, experience, or ethical responsibility. AI can serve as a starting point, not a final authority, and its guidance should always be verified and, when appropriate, reviewed by a qualified financial professional. As AI becomes more embedded in everyday life, critical thinking and human judgment remain essential because when it comes to your money and your future, convenience should never replace sound decision-making.