Should you trust AI with your finances? Financial educator says know where to draw a line

With investors increasingly relying on AI (artificial intelligence) for everything from portfolio management to mutual fund selection, financial advisors frequently get asked, “Why pay a financial advisor when AI can do it for free?”

But a quick test of these chatbots revealed a glaring problem, said Mrin Agarwal, financial educator and chief executive of Finsafe India Pvt. Ltd.

AI frequently offers financial advice, such as arbitrary fund recommendations or short-term equity exposure, without assessing an investor's goals or risk capacity. Whereas Agarwal said, a financial advisor would typically begin with an assessment of goals and risk.

The core problem, Agarwal said, is that investors do not stop to check whether AI-generated advice is actually relevant to their financial situation.

Instead, they are easily swayed to take unintended risks because of AI's warm, confident language, which can lull investors into a false sense of security, and investors only realise when it's too late to reverse.

The financial educator cautioned that while technology may make financial information more accessible, it can also unintentionally steer investors towards risks they may not want to take.

AI chatbots present information with such confidence that it is easy to overestimate their reliability. However, as seen during recent tax seasons, AI often miscalculates because it misses complex tax rules or individual nuances.

In finance, sounding authoritative does not guarantee that the advice is correct or suitable.

“Personal finance is called ‘personal’ for a reason,” Agarwal said, noting that while AI is great for general education, it fails to grasp the individual side of finances.

AI assumes humans behave rationally, but real financial lives are shaped by complex circumstances and emotions. But a financial advisor considers these nuances—and often the emotions—when giving advice, he said.

Sharing life-stage realities, Agarwal said, a 65-year-old needs holistic estate planning, while a 35-year-old in debt needs behavioural coaching—not just a mathematical repayment formula.

During volatile markets, investors often panic. Agarwal noted that an AI will simply echo the framing of your prompt, whereas a human advisor will play devil’s advocate and challenge emotionally driven mistakes.

Replacing an advisor with an algorithm introduces two major structural risks:

AI is an excellent starting point for learning basic concepts or brainstorming questions for your advisor. However, its pattern-based responses should never be mistaken for verified, personalised advice.