Karen Tang, CFP®: Certified Financial Planner in Singapore

Can A.I. Replace Financial Planners? | Her World + Karen Tang

I had the privilege to be interviewed again for Her World, this time in the December 2023 issue. The title of the article is “Trusting AI With Your Money”.

I was asked to share whether I agree or disagree, and what alternative (better) or additional advice I might recommend as a financial expert. The editorial team had prepared this question based on their recent Her World “What Women Want” survey.

The team ran this question through an AI tool called Google Bard: I am 30 and I have not yet started saving for my retirement. Am I doomed to work forever? How can I start my retirement journey now?

Bard’s response was:

No, you are not doomed to work forever just because you haven’t started saving for retirement yet. While it’s certainly true that the earlier you start saving, the more time your money has to grow, it’s never too late to start planning for your financial future.

Here are some steps you can take to start your retirement journey now:

  • Assess your current financial situation
  • Set a retirement goal
  • Contribute to your CPF
  • Open a Supplementary Retirement savings account
  • Start investing early
  • Seek profession advice
  • Review and adjust your plan regularly

The AI tool added a short description to each point. Then it ended off with this:

Remember, retirement planning is a marathon, not a sprint. It’s more important to start saving consistently and increase your contributions over time than to try to save everything up at once. With discipline and planning, you can secure a comfortable retirement for yourself.

Karen’s comments:

In this case, the answer given above is quite helpful, also because this AI service is free, from a reputed company, and instantly accessible by everyone. It forms a good checklist to start with. However:

1. AI is only as good as how it is “trained” i.e. its sources of information input. AI answers can’t always be ‘taken as gospel’. They do need to be verified by someone competent before they can be trusted.

2. Also, the answers generated by the best AI can be only as good as the quality and specificity of the questions that are asked of it. How well the client is able to articulate the nuances of their preferred goal-achievement strategy is key.

3. Finally, this general answer can be rather simplistic. It needs some very specific and well-thought out sub-steps (selected from a range of options available at every stage of planning) to be taken for proper application of ideas till completion in order for the client’s wishes to be fulfilled. Along the way, the client would have unique questions and concerns that he/she would want addressed, and trade-offs he/she may need to make when it comes to the solutions implemented.

Further comments from Karen:

In the above points, I would place “Seek professional advice” much higher. This is because, realistically, a lot of people are not sufficiently adept in the subject of personal financial management, and hence can make some life-altering mistakes when they try to do it on their own without a second opinion by an expert in the field.

Besides that, the following are some of the points that the AI-generated answer missed out that I would add to the answer above:

1. Track your expenses: 

Keeping a detailed record month-to-month of how you allocate your hard earned income is crucial to understanding where adjustments and improvements can be made in the following month. There are some wonderful budgeting apps out there such as Spendee, Wally, and Expensify.

2. Budget your monthly outflows in advance: 

In the last week of every month, sit down quietly to figure out what are the most important expenses for the next month. Also, look at your spending record of the past 3 months to give you insights into your own patterns of money outlays – planned and unplanned. You can split your outflows into fixed (such as rent, mortgage, insurance, utilities, food) expenses and variable (such as entertainment, shopping) expenses.

3. Prioritise what is most important to you: 

This is not just in terms of the bigger, more obvious goals, but also the little things that bring you joy on a daily basis, and keep you motivated. These could include a gym membership, personal care and grooming packages (facials, massages), nights-outs with friends, beverages or meals in your favourite restaurant, and a quick getaway to reset and recharge.

4. Manage your spending: 

This point is for those months when you find yourself going off-track. Jot down the reasons for it. This will help you set more realistic and achievable goals in the future.

5. Pay yourself first: 

This essentially means setting aside money at the start of the month for your single most important goal – such as for retirement or buying a home.

6. Consider ways to increase your income:

Logically speaking, you can only save a finite amount from your income, but the sky is the limit when it comes to increasing your top line. Keep looking out for opportunities that will often walk up to you. After proper risk-reward mathematics, you can convert your energy, passion, and creativity into joyous profit that fulfils your goals.

In summary:

While AI can enhance the efficiency and effectiveness of financial planning, it is less likely to completely replace financial planners. The human touch and the ability to understand and navigate the intricacies of individual financial situations are likely to remain crucial.

Financial planning often involves building personal relationships with clients, understanding their unique circumstances, and providing emotional support. AI may struggle to replicate the empathy and understanding that human advisors bring to these interactions.

To add on, financial planning involves not just the analysis of data and numbers but also the ability to traverse complex emotional and behavioural aspects of personal finance. AI may not fully grasp the nuances of personal situations and preferences.

Even in the area of regulatory compliance, where financial planning is subject to various regulations and ethical considerations, human financial planners are better equipped to navigate these complexities and ensure compliance.

The most successful approach is likely to be a combination of human expertise and AI tools, creating a synergy that leverages the strengths of both.

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