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Transcript

What AI Actually Gets Right About Your Finances (And Where It’s Failing You) · Making Cents

• 0:00
  AI can build you an investment strategy in about 30 seconds flat.
• 0:04
  The problem is it can sound really good when you read through it, only for it to totally fall apart at the first contact with reality.
• 0:14
  And then other times it actually helps.
• 0:16
  Look, we've never had more financial information at our fingertips and mostly this is brilliant.
• 0:23
  But there is a big bear trap where it can make you overconfident with your money and stop you from hitting some big wins that you actually need and you don't realize until it's too late.
• 0:34
  Katie Wesneat from EnableMe is increasingly seeing clients wander into this trap.
• 0:39
  Like, it sounds like absolutely the most amazing plan, but you scratch the surface and it's completely wrong.
• 0:50
  Because the problem is it can make you feel good with your money while actually doing nothing to help or even undermining you.
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  Confidence is a feeling.
• 1:00
  It is.
• 1:01
  But a robust plan can be stress tested under harder circumstances.
• 1:08
  So welcome to Ask the Experts the part of Making Sense where people from inside the money world come to give you that inside word on what's going on right now, what that means for your money.
• 1:19
  I'm Frances Cook, a financial journalist and fellow financial freedom seeker who makes money simple for you today is AI making you worse with your money?
• 1:30
  Making Sense has partnered up with Enable Me to get you the strategies for reaching financial freedom faster.
• 1:36
  Head to their website to learn more.
• 1:38
  Visit Enable Me.
• 1:40
  Today I want to help as many people as possible build a better life for themselves by understanding and taking control of their money.
• 1:48
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• 1:50
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• 1:56
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• 1:59
  Then we can all level up with money together.
• 2:01
  The show grows and I can keep bringing you the money info that actually moves the dial.
• 2:06
  Katie, welcome back.
• 2:08
  So nice to have you in.
• 2:09
  Look, I have had a bunch of different questions from people saying they are chatting to AI and they have been running their budget through it, which to some ways I'm like, that's exciting.
• 2:21
  Have fun that you can take a good look at your money and get the supercomputers to run through it.
• 2:26
  And another part of me goes, ugh, I don't know how I feel about that.
• 2:29
  What's your thoughts?
• 2:31
  Yeah, and I love people empowering themselves and having access to more information.
• 2:38
  I think that's a super great thing.
• 2:40
  But it's always the devil is in the detail and it's how you use it.
• 2:47
  And I think people have to yes.
• 2:50
  Make sure they're taking the good things from AI, but also being skeptical in terms of how it translates to their financial strategy and what they do next.
• 3:00
  Yeah.
• 3:00
  Balance to be had, always.
• 3:02
  Yeah.
• 3:02
  Have you had any clients come in and say that they've used AI?
• 3:06
  Have you got good examples, bad examples?
• 3:08
  Lots of people are using it to explain concepts a little bit deeper, which I think is absolutely the right thing to do.
• 3:17
  Again, with a healthy amount of skepticism, I think, where it gets a little scary.
• 3:23
  I can think of an example, and this has happened several times, whereby new clients have come with financial plans designed by those generic AI tools and they look great.
• 3:38
  They sound super confident in terms of strategy.
• 3:43
  They use really big words like, it sounds like absolutely the most amazing plan, but you scratch the surface and it's completely wrong and rubbish.
• 3:57
  Actually, I can think of an example whereby again, this.
• 4:04
  Beautiful graphs, massive words, even I was like, what does that word even mean?
• 4:09
  Which is also like a red flag.
• 4:11
  Turning to your own AI and being.
• 4:12
  Like, what's the definition of red flag?
• 4:14
  We'll be a product.
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  Your advisor doesn't know the word, hopefully.
• 4:17
  And you know, it was projecting KiwiSaver balances at 55 into the millions.
• 4:26
  It was talking about trading out properties and all these different things.
• 4:31
  And I was like, wow, sounds, you know, let me have a look at this client.
• 4:36
  And in all reality, what it had missed was fundamentally they had one home in negative equity and some quite modest KiwiSaver balances.
• 4:48
  Nowhere in that document did it talk about addressing the debt.
• 4:53
  And I thought, wow, what a trap.
• 4:57
  Because it said it so confidently.
• 5:00
  And so I think it's really understanding what are you inputting into the AI models, also knowing that garbage in, garbage out.
• 5:09
  Right.
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  In terms of assumptions.
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  So, yeah, super useful.
• 5:13
  You've got to be careful.
• 5:14
  That's actually a really good point about the garbage in, garbage out.
• 5:17
  Because that is the big thing is a lot of these AI models are totally reliant on what you give it, what or what you ask it.
• 5:27
  Absolutely.
• 5:28
  And if you don't know what questions to ask, which many of us don't, then it's.
• 5:33
  It's just going to give you quite a narrow response.
• 5:37
  And exactly like you say, you know, you might say, how do I build wealth for my retirement?
• 5:42
  And it doesn't know that you've got a bunch of debt that you need to pay off first.
• 5:45
  And it won't say, do you have a bunch of debt?
• 5:48
  Or ask those other questions that a financial advisor does when they're laying out the groundwork.
• 5:53
  Right.
• 5:53
  And it wasn't being malicious, but also understanding that a lot of these models, they're designed to be affirming to you as well.
• 6:04
  Super sycophantic.
• 6:05
  Yeah.
• 6:06
  And that is not my job as a qualified financial advisor.
• 6:10
  And it's so interesting, Frances, because often people come and I'll say, you know, what do you want to get out of this session?
• 6:17
  And they might say something like, super specific, Katie, My mortgage is just about to come off its fixed term, so I would like to know how long to fix it for.
• 6:27
  And that is a great question.
• 6:30
  But when I look at their position and I am trained to look at their entire position, I'm like, well, if I'm honest with you, you fixing for one year, two year or three year, I think we've got bigger
• 6:44
  fish to fry.
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  You've got savings sitting there doing absolutely nothing.
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  Could we be offsetting those potentially?
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  You've got your partner here.
• 6:54
  There's lots of friction around money.
• 6:55
  Should we sort that in terms of having a joint plan and your Kiwisavers and conservative and you've got 15 years to run, so is that the right thing for you?
• 7:06
  So I think it's looking at all your position, looking at your partner's position, if your positions are combined and making sure that you are checking your inputs because knowledge is important, but you've got to check, you've got to
• 7:24
  check it.
• 7:24
  Does it stand up and understanding, well, even after I check it, how would that translate to action going forward?
• 7:32
  Is that setting up an investment account or setting up an automatic transfer to save or invest or is it to book in a consult with an advisor?
• 7:44
  So again, it's always taking the information, checking it and then saying, well, what do I do with it going forward?
• 7:54
  Not so fun fact.
• 7:55
  When you take on a 30 year mortgage, you'll probably pay more than double what you originally borrowed because of the cost of interest.
• 8:04
  That's probably not the Kiwi dream.
• 8:06
  You bought into the team at EnableMe, specialise in taking charge of your money and growing your wealth, including how to get rid of your mortgage faster.
• 8:16
  Book a consultation with an EnableMe financial advisor today by visiting Enable Me.
• 8:22
  One of the things, like, I both love this and don't love this because, you know, we've got supercomputers in our pockets these days.
• 8:29
  Like, it's wild how powerful the standard smartphone is and what you can access through it.
• 8:34
  Love that.
• 8:35
  And yeah, I do think they can sometimes be so much information that it's kind of hard to drill down to what is relevant to me.
• 8:44
  What is relevant to my situation?
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  What questions do I need to be asking?
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  What areas do I need to look into?
• 8:51
  What are some of those groundwork questions that you ask clients in order to figure out that first direction that you're heading?
• 8:59
  I always am dubious when people come with, they're really confident in a financial strategy, but they can't tell me their net worth, they can't tell me their monthly expense load, they can't tell me the interest rate on the
• 9:21
  debt that they have, and they can't tell me whether they have an emergency buffer.
• 9:25
  So those are really important dynamics in terms of that really strong financial foundation, which is true to you and your position and your numbers, because that's the critical piece when you're looking at financial planning.
• 9:39
  How do these concepts, like you always say, how do we make them relevant to me and what is the best thing that I can do going forward?
• 9:49
  Because it's generally not just one thing, it's a mixture of all different things and what's the right recipe for me?
• 9:55
  Yeah.
• 9:55
  And do you think there can sometimes be that, you know, when we're taking in so much information, there can almost be that lulled into a false sense of security and that slight overconfidence of like, oh, yeah, yeah, I've
• 10:09
  got this and that down.
• 10:10
  And we were not seeing the full picture in terms of how truly prepared.
• 10:14
  We are with our money.
• 10:15
  Confidence is a feeling.
• 10:17
  It is.
• 10:18
  But a robust plan can be stress tested under harder circumstances.
• 10:25
  And a robust plan is based on your numbers and your needs.
• 10:30
  So I think that's the crucial difference.
• 10:32
  Like confidence, we can feel confident, but actually that preparedness is quite different and is anchored to a plan based on our numbers and also stress tested on a stormy day when it's not shining because bad things happen.
• 10:49
  Right.
• 10:50
  And we've got to prepare for them.
• 10:51
  So that's the importance of having that good plan.
• 10:54
  Not just.
• 10:55
  I feel really confident because AI is affirming what I'm doing at the moment.
• 11:00
  Is it asking the right question?
• 11:02
  And I always wonder, you know, at the end it's like, AI can make mistakes.
• 11:07
  You're like, oh, that's quite impactful.
• 11:09
  It's quite a big get out of jail free card.
• 11:11
  Yeah.
• 11:11
  I mean, I can't give advice and go, oh, because asterisks.
• 11:14
  Katie can make mistakes.
• 11:16
  Because actually I can't.
• 11:18
  I actually, I have a duty of care to protect my clients.
• 11:21
  You know, we are very well regulated in New Zealand.
• 11:24
  So, yeah, use it for the good things.
• 11:27
  And then make sure that you have a plan and you're getting good advice based on your position.
• 11:33
  Yeah.
• 11:33
  What would be okay, what would be some things that if a client came to you and said, I've been using AI, what are some things that you would say, fine, awesome, go for it.
• 11:40
  And what are some things where you'd be like, maybe not that.
• 11:42
  So I think around education, when it's asking to explain concepts, to collate information in terms of that budgeting piece, super useful.
• 11:53
  Some clients have come so well prepared, using AI to help them ask me really good questions.
• 12:00
  And I love that.
• 12:02
  But I think it's when the education piece, when the AI tool is generic, is giving you advice, then you've got to question, are the inputs right?
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  Where is the information coming from?
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  Is there any oversight?
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  Those are the things we need to be thinking about.
• 12:21
  And is it based on my position in my numbers?
• 12:26
  Yeah.
• 12:26
  And then that gap that we were talking about before between sort of the confident feeling versus being truly prepared, what are some good ways to close that gap so people can still feel.
• 12:36
  I want people to feel good with their money.
• 12:38
  I want them to feel confident, but I want that to be matched by the reality of what's going on.
• 12:42
  So how do we make sure the two of them are both healthy?
• 12:45
  When you have a plan, you understand what your goals are.
• 12:50
  That's really important.
• 12:52
  So I think goals can be super generic.
• 12:55
  So it might be, I wanna buy my first home, I wanna pay off my mortgage, I wanna sort retirement.
• 13:02
  So in the first instance, if you wanna buy a home, how long is it gonna take?
• 13:06
  What are you gonna spend on that home and what do you need to be saving?
• 13:11
  So again, it's stress guessing with your numbers.
• 13:14
  If you wanna pay off your mortgage, what are you doing at the moment?
• 13:18
  Start with that.
• 13:19
  And if you have surplus funds to chuck against it, what does that mean?
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  And what else does that unlock when you're talking about retirement?
• 13:28
  It's like, well, where do you need to get to?
• 13:31
  And a really good place to start is understanding, well, what do you need to spend of a typical day?
• 13:37
  So again, that's stress testing the strategy based on your actual numbers and what you can do to ensure that you get there.
• 13:46
  I love that.
• 13:46
  That's so good.
• 13:47
  All right, thank you so much, Katie Wesney from EnableMe.
• 13:50
  Now, we've had so many questions coming through recently, so I smooshed a bunch of them into this episod to create all the questions.
• 13:57
  But if you have more, send them through and we can either do a deep dive on your question.
• 14:02
  Or again, smush a bunch of them into one.
• 14:04
  Run them all past Katie at once.
• 14:06
  AskRancisCook Co NZ is the email address to send it to.
• 14:11
  Until next time, have a great day.
• 14:14
  This podcast can only give you general information about how things work in most situations.
• 14:20
  It's not individual financial advice.
• 14:22
  If you're after that, a financial advisor is always the best bet.