She opens an AI chatbot, types in the details and gets a calm, well-organized and confident answer: Claim now, convert this much, here is the reasoning.
Suzy won't find out for a long time, if ever, whether this guidance was right for her. And the AI will never call back to say it was unsure.
A growing number are asking AI about money, and some are getting burned. According to a 2025 survey of 2,000 U.S. adults by Pearl.com, a professional services platform, 19% said they lost more than $100 by following financial advice from an AI chatbot. Among Gen Z investors, that figure rose to 27%.
As a finance professor who has been closely watching the spread of AI into personal finance, this is the part of the AI story that worries me most. And it's not the part you usually hear about.
I argue these are actually two sides of the same coin, and what decides which side you see is whether you can tell when the AI is wrong.
The dangerous failure is the opposite. The answer is fluent, confident — and wrong. You have no way to catch it, so you keep managing the problem yourself long past when you should have asked for help.
Typical users of chatbots for financial advice tend to be younger, with men outnumbering women. (Image credit: Krongkaew via Getty Images)
When you mistake fluency for accuracy
Three things make financial advice especially treacherous for AI.
Second, AI is least reliable exactly where the stakes are highest. AI tools are good at routine and general topics: what a Roth IRA is, how compound interest works, the difference between a stock and a bond.
I made a similar argument three years ago about AI trading on Wall Street. Because market crashes are rare, there's little data for AI to learn from, so it can be most confident exactly where it is least informed.
Third, you often can't check the work. Financial advice is what economists call a "credence good," like a mechanic's diagnosis or a doctor's recommendation. You often can't tell whether the advice was good, sometimes for years. A mistaken tax move may not surface until an audit. A bad 401(k) drawdown plan may not bite until the stock market slumps. Without quick feedback, the wrong-but-confident answer never gets corrected.
Notice that the real harm in Suzy's story isn't a single dramatic mistake. It's that a confident answer made Suzy feel no need to call a professional, so the call never happened.
Who's most at risk? In a study of a large robo-advising platform in India, co-author Vishaal Baulkaran and I found that its users skew young, are predominantly male and tend to be smaller retail investors and professionals. And new account sign-ups rise during periods of high market volatility.
There's also an incentive worth naming. In my new analysis, I argue that a tool that earns its revenue by holding your attention has a reason to sound confident and helpful: Confidence keeps you on the platform. The catch is that the user it retains that way is sometimes the one who should have been handed off to a human.
How to be smart about using AI
These findings don't mean that people should avoid AI for money advice. Used well, these tools are a valuable and free financial educator.
But if you do turn to AI, the skill is knowing where to draw the line.
But watch out for the signals that you have left its comfort zone and entered the territory where AI is weakest and a confident answer is least trustworthy. The red flags are large dollar amounts, tax consequences, anything irreversible and anything that turns on the specifics of your situation rather than a general rule.
Related storiesEstate questions, the drawdown of retirement savings, strategies for claiming Social Security benefits, business structure and major one-time transactions all belong in this category. Those are the decisions that call for bringing in a human, such as a certified financial planner.
This edited article is republished from The Conversation under a Creative Commons license. Read the original article.
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