Before you ask AI how to invest $5,000, read this first
AI could choose investments and plan your financial future - but would you want it to?
Now that AI is taking over seemingly everything, you may wonder if it can handle your financial planning and investment management. Will bots replace human advisers?
Probably not.
Investors often expect more from their advisers than facts and figures. They want interpretation and reassurance during tumultuous times.
While artificial intelligence can help advisers operate more efficiently, there's little indication that it can supplant experienced financial planners. It turns out that managing cash flow, planning for retirement and building, and maintaining a diversified portfolio requires a healthy dose of human judgment.
If you enlist AI for financial advice, you'll certainly get it. Plenty of it. The question is whether it's sound and aligned with your goals, values and needs.
For example, researchers asked seven widely used generative AI tools to give financial recommendations. The researchers found significant variability in the advice and spotted some potential demographic biases.
Specifically, the study evaluated the consistency and fairness of the recommendations tied to household financial planning, emergency savings, retirement withdrawal rates and investment portfolio allocation. The results varied most widely in emergency-savings advice and asset allocation.
"The quality of responses you'd get from generative AI tools depends on the quality of the prompt," said Brenda J. Cude, one of the study's authors and professor emerita at the University of Georgia's department of financial planning, housing and consumer economics. "The people who have the most knowledge will benefit the most [because] they know how to formulate the questions and interpret the answers."
If you ask AI how to invest $5,000, for instance, you'll get a wide-ranging and possibly misguided response. But if you include your risk tolerance and time horizon along with your current investments, liquidity needs, debt level and other factors, the answer may prove more useful.
"You need that background and understanding of investments [to prompt AI for best results]," Cude said. "That's where an adviser comes in," posing the right questions that produce more accurate, targeted advice.
Cude added that a smart way that individual investors can harness AI is to ask it, "What questions should I ask a financial adviser?" That can help you identify and address key issues and do your due diligence - whether you wind up hiring an adviser or not.
If you've already retained an adviser, explore what role (if any) AI plays in servicing clients. Cude suggests asking your adviser:
-- Are you using generative AI? If so, how?
-- How do you assess if AI is effective? Will I be able to assess this as well?
-- How has your use of generative AI changed your recommendations-or led you to ask me different questions?
AI for advisers
Many advisers already incorporate AI into their business. They use AI-powered analytics to design portfolios, facilitate regulatory compliance and streamline client communication.
Aside from automating tasks, advisers might apply AI to predict market behavior or evaluate investment strategies. The technology can also help boost cybersecurity at the adviser's firm and reduce fraud.
For Luke Delorme, a certified financial planner in Great Barrington, Mass., AI is especially valuable in capturing and retaining client information.
"The most common AI tools advisers are using are note-taking tools," he said. "My AI is in the room during Zoom calls with clients. It's taking notes, summarizing the meeting and writing follow-up emails."
Like Cude, Delorme finds that AI responds reasonably well to precise questions with clear frameworks. But it can falter when human inputs are too limited or vague.
He's currently exploring ways to increase his use of AI to improve client service and financial guidance. He recently put Claude AI to the test, posing as a healthy, single, 62-year-old woman with some savings who wants to retire at 65 but harbors longevity and inflation concerns.
Asking whether the woman should delay Social Security benefits until 70, Claude's response was "thoughtful and balanced, something similar to what I'd tell a client," he said.
Claude replied that delaying benefits might make sense. But the AI put its answer in context. "Between ages 65 and 70, you'll need to fund five years of retirement without Social Security," it advised. "That means drawing down your savings more heavily in those early years. Whether that's sustainable depends on how much you've saved. A financial planner can help you model whether your portfolio can bridge that gap comfortably."
Delorme says that if he'd supplied more data, the answer would've probably been improved.
When it comes to stock picking, however, Delorme is skeptical that AI can deliver much value. "I don't think a chatbot will identify a particular stock," he said. "It might identify stocks with the best momentum" but not highlight ones to buy now.
Another limitation of AI involves confirmation bias. It can produce answers that confirm your existing beliefs. "AI is known to give you answers you want," said Ryan Marshall, a New York City-based chartered financial analyst. "A lot of times, it tends to agree with you."
Marshall says that the best human advisers engage in more objective discussions with clients. An adviser's recommendations may not always be pleasing to hear, but they flow from a more complete understanding of a client's situation based on detailed fact-finding, probing and insight into the client's needs.
-Morey Stettner
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 24, 2026 08:10 ET (12:10 GMT)
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