An increasing number of Canadians already using AI to manage investments

Using technology to manage your finances is nothing new, but with the arrival of artificial intelligence (AI), Canadians are increasingly using it to manage finances and investments, according to a recent study by BMO.

 

In its latest findings from the Real Financial Progress Index, the bank highlighted a significant trend: 33 per cent of Canadians, mostly generation Z and millennials, are turning to artificial intelligence to manage their finances and investments. Canadians are using AI to learn more about personal finance topics, create and update their budgets and identify new investment strategies.

 

When asked if AI is ready to take on the role of financial adviser and planner, experts agree that it depends on what information you’re getting, how much you trust the information and the reasons why people are turning to it instead of the financial industry.

 

“I have a controversial opinion,” says Colin White, portfolio manager and CEO of Verecan Capital Management. ”It’s because financial services in Canada is largely a sales game and people are really disenfranchised from most channels of financial advice. They’re looking for any viable alternative.”

 

He mentions a CBC Marketplace investigation that found that banks pressured employees to upsell unnecessary products and services to customers to meet sales goals.

White says that AI seems sentient and able to communicate well.

 

“It gives a sense of comfort and control to people when they really can’t get that sense through normal routes, because every conversation they’re having with a financial professional is sales focused.” He says using AI seems to be dispassionate, rather than one that has an angle.

 

Gayle Ramsay, the head of everyday banking, segments and customer growth at BMO, says gen Z and millennials want to learn about financial products, services and advice by themselves first.

 

“They want to do their own little bit of work to understand the financials,” she says. “And then what we find is a lot of times they will then reach out to a financial planner, but they do want to play around with (AI) a little bit themselves.”

 

If you’re going to integrate AI into your financial planning, both Ramsay and White say there are a few things to keep in mind — including its limitations, says White.

 

“(Companies have) put a lot of work into making it sound very good, but (Google’s AI) still recommended using super glue to hold pepperoni on a pizza. It’s still manufacturing case law that lawyers have actually presented in court.”

 

He says that the challenge is that AI can sound professional, so someone who may not have enough knowledge to understand and interpret the information can get misled.

AI is also prone to hallucinations, which is false or misleading information. That’s because these programs are trained on what’s available, incorrect, biased or incomplete information. It’s estimated that AI programs like ChatGPT, Copilot and Gemini can hallucinate anywhere from three to 27 per cent of the time, according to generative AI startup Vectara out of Palo Alto, Cal., which keeps a hallucination leaderboard on GitHub.

 

Ramsay says people using AI should do their homework before executing any advice.

 

“It’s really important to understand what sources it’s using,” she says. “There are tools that do financial planning that have been in the space for a long time which means they’ve been using (reputable) information. I always say it is good to understand if (the sources) have experience in this space.”

 

Neither adviser sees AI as a threat to the industry. The report found that while people are using artificial intelligence for financial planning and advice, 68 per cent of those surveyed said the program can’t understand how emotions influence financial planning.

 

White says if you were to upload a lot of information on your personal situation and ask it to manipulate the data, you probably would get some fairly useful insights out of that factual basis. AI doesn’t consider the emotional aspect of investing such as the stress a person feels when the market drops as it did in early August.

 

“There’s a difference between asking, ‘What should I do? I want to retire at 65? versus ‘Here’s all my financial information, here’s my situation’ and going, ‘OK, based on my personal situation, what kind of retirement income might I expect?’ ” says White. He says the AI is going to do a better job answering factual things because it’s a good calculator. That’s versus asking hypotheticals as it will “regurgitate the basic drivel that you would get by crawling the web.”

 

“It gives you insight and information but because (finances) are an emotional thing, it’s complex, and personal,” Ramsay says. “Having someone who has expertise to provide insight into your financial plan can be helpful.”

 

Then there’s the issue of privacy. The Office of the Privacy Commissioner of Canada has published multiple articles and studies about the potential risks of AI technology and how these tools might make use of private information. Members of the G7 have and are putting legislation into effect that protects people’s privacy and ensures that AI systems are safe and protect private information.

 

In the meantime, both experts say that artificial intelligence has provided opportunities for the financial industry as well. Advisers can use it to manage administrative tasks, leaving them to work more closely with their clients. Still, White says the technology has highlighted an area of improvement in the financial industry.

 

“I do know that there is an appetite for people to get advice in a different way because of their lack of trust and comfort with the main channels. So the industry has kind of created this opportunity for AI to jump in and try to take advantage of it a little bit.”

 

 

 

 

This article was first reported by The Star