Artificial intelligence changes financial advice, but does not replace it. Consultant Andrea Palmas speaks: opportunities, risks and limits of constantly evolving technology
Some use it to ask for advice on how to invest their savings, some to analyze markets, some simply to orient themselves in a complex sector. In short, artificial intelligence has also entered the world of personal finance. But is blindly relying on these tools really a good idea? To answer this extremely complex and multifaceted question, we gave the word to Andrea Palmasfinancial consultant with years of experience in the field.
A real opportunity, but with many nuances
Palmas he starts from afar, from a premise that reveals his overall vision: «Distrust towards technologies that change our relationship with knowledge has a very long history. Plato, in the Phaedrus, warned the world of the dangers of the invention of writing, because it was thought it could weaken memory and give people the appearance of wisdom without authentic understanding.” A parallel that fits perfectly, in his opinion, with today’s debate on artificial intelligence.
His position is essentially neutral, one of prudence and observation: “I am always cautious with respect to both optimism and catastrophism.” That said, he undoubtedly recognizes its potential. AI can facilitate access to information, improve analysis and planning tools, and in a country like Italy, where financial education is historically lacking, “having more information is a positive thing”.
The risk, however, is subtle. «With artificial intelligence a person can obtain a sophisticated analysis and at the same time become less able to recognize the limits of that response. The ease with which we receive answers can lead us to underestimate the difficulty of the question.” The distinction he proposes is that between a convincing answer and a well-founded answer. And they are two very different things.
Here are the most concrete risks
Palmas is direct: «Asking investment advice from artificial intelligence is, to date, profoundly wrong». The main reason is the so-called “hallucinations”, i.e. the incorrect or invented responses that AI systems still produce with a certain frequency. “It’s very difficult to verify that that kind of information is correct,” he says. And in the field of investments, wrong information can cost you very, very dearly.
But there is an even more serious, as well as less obvious, mistake. «Financial decisions are not just calculation. They involve behaviours, emotions, personal constraints linked to the context of each of us, to culture, habits and values”. AI, however sophisticated, cannot govern this dimension. As an example, Palmas mentions the CFA exam, one of the most prestigious awards in the world of finance, which requires years of study and three progressive exams. «Artificial intelligence today is able to overcome the third level, the most difficult. But all this is not enough to translate into better investment decisions.”
Then there is the issue of procrastination. Data on investor behavior shows that, in times of market crisis, many intervene on their portfolios despite it being widely demonstrated that it is counterproductive. “I doubt that AI will stop people from procrastinating,” Palmas observes.
How a professional really uses it
In daily work, Palmas itself makes extensive use of artificial intelligence, but in an extremely targeted way. «First of all for the calculations: with AI you can do them at a speed that was previously unthinkable». He writes code for Monte Carlo simulations, a tool used by professionals to plot probabilistic scenarios. Previously it took weeks, today only a few hours. «It’s not me who works less: it’s that I can offer the client more precise, verified analyses, checked more times and in less time».
He also uses it for continuous training: «I can quickly research the best studies on everything related to subjects consistent with my work». A powerful resource, however, that works because Palmas already has a solid base of skills to rely on.
Who shouldn’t rely on artificial intelligence to invest
And this is where the consultant draws a clear line. «If you don’t know how to approach investing, you shouldn’t invest. Or rather, you have to rely on a trusted person who knows how to guide you, not artificial intelligence.” You learn by studying, from accredited sources. «An uninformed and unprepared person should never invest alone, with or without artificial intelligence».
AI, at most, will be able to evolve towards new service models in the professional financial industry: flesh-and-blood consultants supported by increasingly advanced digital tools. But the customer who opens ChatGPT and asks what the best investment is “is madness”, he says Palmas without mincing words.
What remains irreplaceably human
The space between analysis and execution is where the real game is played. «Artificial intelligence can propose an efficient solution. What it cannot do is guarantee that it is maintained over time. It cannot replace the mutual responsibility and the activation mechanism that arises in a relationship of trust.”
When you meet a new client, Palmas he needs to understand much more than numbers. How old he is, how many children he has, how much he earns and how much he spends. But above all: «I always ask what the fears are. The ones linked to money, the ones that keep you awake at night.” These are questions that are often not answered in a single meeting. Sometimes it even takes years. «Everything that is not calculation, everything that is not number: it is better to leave it to the human».
The paradox, he concludes Palmasis that AI could ultimately help advisors make themselves better understood by clients. By automating the technical parts, optimizing products, containing costs, rebalancing portfolios, it frees the professional to do what really matters: «Making people understand that financial consultancy is not about choosing one product over another. It’s something much deeper.”
