We often turn to AI chatbots askng for a wide range of tasks, including financial advice. While AI can save time, simplify complex information, and even help users compare financial products, relying on it blindly can have dangerous impact.
One of the biggest limitations of AI-generated financial advice is that the quality of the response depends heavily on the quality of the prompt.
Better prompt, better advise
AI is only as good as the information and context provided to it. If users fail to ask the right questions, omit important details about their financial situation, the chatbot’s response may be incomplete, inaccurate, due to which the user can face heavy losses.
Explaining why AI cannot fully replace professional financial guidance, Abhishek Kumar, SEBI-registered Investment Adviser (RIA) and Founder of SahajMoney, says, “These models lack regulatory oversight and emotional intelligence. As a result, they often fail to understand the nuanced personal goals, family circumstances, behavioural biases, and risk tolerance that are critical to effective wealth management.”
“Hence making critical decisions based on these robotic advice can result in expensive compliance penalties, poor asset allocation, and permanent financial loss”
Another key issue is – Bots have the tendency to confidently fabricate or misinterpret intricate tax laws, investment regulations, and market trends so relying on AI for financial planning can backfire, he adds.
Risk is bigger when…
Often to create the detailed prompt, individuals are tempted to share their personal and banking details like:
- Aadhaar number,
- PAN number
- Credit card, debit card details
- bank account details
- income, debts, investments
- phone number,
And Kumar says disclosing such data to AI models poses a serious risk “because most systems by default retain, analyse, and use conversational inputs to train future iterations.”
“Once uploaded, sensitive identifiers like account numbers, income details, or medical notes can become permanently embedded in a system’s dataset, rendering them vulnerable to data leaks and unauthorised third-party access.”
For example, let’s say AI tool accidentally leaks your credit card statement, then an attacker could craft a phishing message from any of the hundreds of merchants you’ve made purchases from, and it would be believable because they would know the date of your purchase, the merchant’s name and the amount paid.
As much as it is advisable not to use AI at all for finanicial advisory, as technology continues to advance, we must evolve with it and learn how to use new tools responsibly and effectively. But, we must remberer, AI is still at a very nascent stage and needs much refinement, hence we have to be more careful about how we are using it:
Check the tool’s latest privacy and data retention policies: If you’re using a paid (or enterprise) version of any AI program, you’ll likely have somewhat greater protections than you do using the free option, also it also depends on which version you’re using, as per a CNN article.
Turn off AI training on your data: If you do not want your information to be used to train an AI model, you need to manually opt out through the tool’s privacy settings. However, these options are often not easy to find, so you may need to spend some time searching
Remove personal details before sharing documents: If you upload bank statements, bills, or other financial documents to an AI tool, make sure to hide or delete sensitive information such as your name, account numbers, addresses, transaction dates, locations, and merchant names. Share only the information that is necessary for the AI to help you.
The best way to use AI is as a support tool that helps with research, analysis, and decision-making, rather than as a replacement for professional advice, human expertise, and independent judgment.