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AI has a big problem when it comes to financial advice: MIT professor

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4 months ago

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The financial capability of artificial intelligence platforms is improving to the extent that it will likely be able to replace human financial advisors in the future, according to finance experts.

However, AI has a major drawback relative to human advisors: a lack of fiduciary duty, they said. And a resolution to that legal gray area doesn’t seem near at hand, they said.

A fiduciary duty is a legal obligation that many financial advisors — and professionals in other fields, such as lawyers and doctors — owe their clients. It essentially means they will put their clients’ best interest ahead of their own.

“The problem that we have to solve is not whether AI has enough expertise,” said Andrew Lo, a finance professor and director of the Laboratory for Financial Engineering at the MIT Sloan School of Management. “The answer right now is, clearly, AI has the [financial] expertise.”

“What they don’t have is that fiduciary duty,” Lo said. “They don’t have the ability to suffer consequences if they make a mistake to the same degree that a human advisor does.”

An advisor who violates their fiduciary responsibility can be subject to fairly serious consequences, including regulatory penalties, civil liabilities and criminal charges, Lo said.

The notion of putting a client’s interest ahead of yours “has no teeth” without responsibility or legal liability, he said.

An ‘unresolved’ legal question

Many people seem to be turning to large language models — examples of which include OpenAI’s ChatGPT, Anthropic’s Claude and Google’s Gemini — for financial advice.

Two-thirds of Americans, or 66%, who have used generative AI say they have used it for financial advice, according to an Intuit Credit Karma poll published in September. The share swells to 82% for millennials and Generation Z.

About 85% of respondents who have used GenAI for financial advice acted on the recommendations provided, according to the survey, which polled 1,019 adults.

“People are looking to these services for all sorts of advice, and they’re getting it, and it seems to be a big open regulatory question,” said Sebastian Benthall, a senior research fellow at New York University School of Law’s Information Law Institute.

“Who’s really responsible, and can people really be relying on a product to do this if it’s not being backed up by a corporation with a fiduciary duty?” Benthall said. “It’s really unresolved.”

Why you shouldn’t blindly trust AI — or humans

That said, there are some good use cases for AI in financial planning, Lo said.

AI is “really good” at providing resources online for various financial concepts that typical people don’t understand, Lo said. For example, if someone were to seek answers to basic questions about Medicare, AI can generally provide a reliable overview, he said.

While AI’s output is sophisticated in many financial respects, consumers generally shouldn’t blindly trust answers to questions about their own household finances, Lo said.

“When it comes to very, very specific calculations of your own personal situation, that’s where you have to be very, very careful,” he said. “One of the things about LLMs that I find particularly concerning is that no matter what you ask it, it’ll always come back with an answer that sounds authoritative, even if it’s not.”

In this sense, double and triple checking an AI’s answers is “really necessary,” he said.

Perhaps surprisingly, AI isn’t strong at doing financial calculations, Lo said — so any numbers-based financial planning questions involving your taxes, for example, are generally best avoided.

They don’t have the ability to suffer consequences if they make a mistake to the same degree that a human advisor does.

Andrew Lo

finance professor and director of the Laboratory for Financial Engineering at the MIT Sloan School of Management

James Burnham, a legal and government affairs official at Elon Musk’s xAI, said in a social media post in March that the company’s AI platform, Grok, “is not tax advice so always confirm yourself too.”

Of course, many human financial advisors provide advice to clients, and it is then up to the client to decide whether to implement it.

“I think that’s the way that I would look at LLMs: They can be very, very useful in providing different options and in describing how those options might work, but you should always remember that the advice that they can give you could be wrong,” Lo said.

“But I would argue that that’s true with human financial advisors as well,” he said.

Not all human advisors are fiduciaries

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Not all human financial advisors are fiduciaries, either.

The landscape of financial advice is a minefield of different legal relationships. Those legal duties can differ depending on factors such as whether the person a consumer is talking to is a stockbroker, registered investment advisor, insurance agent or other intermediary.

For example, a U.S. Labor Department rule issued during the Biden administration sought to bestow a fiduciary duty on intermediaries that recommended rolling money from a 401(k) plan over to an individual retirement account, a move that can involve hundreds of thousands of dollars.

However, that rule recently died after the Trump administration stopped defending it in court — meaning many financial intermediaries aren’t beholden to a fiduciary duty regarding rollover advice. As a result, legal experts recommend consumers approach such rollover recommendations with caution, due to the potential for conflicts of interest.

I used an AI tool to do my taxes—here's where experts say I went wrong

Benthall, of New York University, proposed a similar legal predicament regarding AI advice: Since AI giants right now are largely U.S.-based, if an AI were to suggest that investors put their retirement savings into U.S. stocks, that advice could be viewed as self-dealing, or a financial conflict of interest.

That said, companies that provide AI services don’t appear to receive compensation for their advice to retail investors, and therefore aren’t fiduciaries, said Jiaying Jiang, an associate law professor at the University of Florida Levin College of Law who is researching AI and fiduciary duty.

Who’s really responsible, and can people really be relying on a product to do this if it’s not being backed up by a corporation with a fiduciary duty? It’s really unresolved.

Sebastian Benthall

senior research fellow at New York University School of Law’s Information Law Institute

However, financial advisors who owe a fiduciary duty to clients could violate that duty by using AI, Jiang said.

For example, if an advisor uses AI to give a certain recommendation to a client, but that recommendation isn’t in the client’s best interest, it is the advisor — and not the company backing the AI platform — that would be liable, Jiang said.

Ultimately, Lo said he thinks government policy needs to change to provide fiduciary protections for consumers who get financial advice from AI.

Until then, “we’re not going to get to the point where we can fully delegate these [financial] decisions,” Lo said.

“But I do believe that that will eventually happen,” he said.

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$20,000 Caution Bond Requirement for US Visa Applications imposed on 50 Countries

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6 days ago

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August 8, 2026

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The United States Department of State has officially implemented a revised visa policy introducing a mandatory posting requirement for caution payments of up to $20,000 on select foreign travel applications. Under the updated regulatory framework, consular officials are authorized to require temporary nonimmigrant visa applicants from targeted foreign countries to post a refundable financial bond of $20,000 as a condition for visa issuance. The policy mechanism is designed to address diplomatic concerns regarding high overstay rates among temporary visitor, business, and educational visa categories.

The caution bond pilot program applies selectively to foreign nationals from designated countries whose diplomatic entities record historical visa overstay rates exceeding established federal thresholds. Under administrative guidelines published by the State Department, the full financial deposit is posted directly to a dedicated federal escrow account prior to final visa issuance. The entire caution payment is automatically refunded to the applicant upon verified proof of timely departure from the United States in strict compliance with the authorized duration of stay. Conversely, failure to depart within the legal timeframe results in full forfeiture of the posted financial bond to the United States government.

Diplomatic representatives and travel policy experts have expressed varying perspectives regarding the operational implementation of the caution bond system. Administration officials emphasize that the measure serves as an effective, market-based incentive to enforce international travel compliance and preserve domestic immigration security standards. However, international trade organizations and foreign diplomatic missions have raised concerns regarding the financial burden imposed on legitimate business travelers, foreign students, and commercial partners from developing nations.

The United States finalized the rule to make the temporary visa bond program permanent, taking effect on August 3, 2026. The updated permanent regulation replaces the prior 12-month pilot, eliminates the lowest $5,000 tier, and raises the maximum required bond amount to $20,000 for specific B-1/B-2 business and tourist visa applicants.

Here is the list of the 50 countries on the list as o August 3, 2026

African Nations (31 Countries)

  • Algeria
  • Angola
  • Benin
  • Botswana
  • Burundi
  • Cabo Verde (Cape Verde)
  • Central African Republic
  • Côte d’Ivoire (Ivory Coast)
  • Djibouti
  • Ethiopia
  • Gabon
  • The Gambia
  • Ghana
  • Guinea
  • Guinea-Bissau
  • Lesotho
  • Malawi
  • Mauritania
  • Mauritius
  • Mozambique
  • Namibia
  • Nigeria
  • São Tomé and Príncipe
  • Senegal
  • Seychelles
  • Tanzania
  • Togo
  • Tunisia
  • Uganda
  • Zambia
  • Zimbabwe

Asian & Eastern European Nations (11 Countries)

  • Bangladesh
  • Bhutan
  • Cambodia
  • Georgia
  • Kyrgyzstan
  • Mongolia
  • Nepal
  • Papua New Guinea
  • Tajikistan
  • Turkmenistan
  • Uzbekistan

Caribbean & Latin American Nations (5 Countries)

  • Antigua and Barbuda
  • Cuba
  • Dominica
  • Grenada
  • Venezuela

Oceanian Nations (3 Countries)

  • Fiji
  • Tonga
  • Vanuatu

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Next-Generation Retirement Planning: Managing Longevity Risk and Variable Income Streams

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1 week ago

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August 7, 2026

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Retirement planning strategies are evolving in 2026 to address increased life expectancies, shifting dynamic market conditions, and the transition away from traditional defined-benefit pensions. Individual investors and financial advisors are abandoning rigid retirement models in favor of flexible, multi-asset strategies designed to mitigate longevity risk and preserve purchasing power over multi-decade retirement horizons.

Mitigating Longevity Risk with Dynamic Asset Allocation
As average life expectancies extend past eighty-five years, one of the primary financial risks facing retirees is outliving their accumulated wealth. Traditional fixed income allocations—such as the standard 60/40 equity-to-bond portfolio—are being reevaluated to ensure portfolios generate sufficient capital growth alongside reliable income.

Financial planners recommend maintaining a meaningful equity allocation throughout retirement to offset long-term inflation erosion. High-dividend equity funds, global real estate investment trusts (REITs), and inflation-indexed Treasuries are combined to create diversified portfolios that deliver both growth and income stability.

The Transition to Dynamic Withdrawal Strategies
The classic “4% safe withdrawal rule” is increasingly replaced by dynamic withdrawal strategies that adapt annually based on market performance. Under a dynamic withdrawal framework, retirees adjust their annual distribution rates within pre-set caps and floors:
– Market Upside: During strong market returns, retirees can increase discretionary spending or fund family legacy gifts.
– Market Downturns: During market pullbacks, spending distributions are temporarily reduced to prevent sequence-of-returns risk and preserve core investment principal.

Guaranteed Lifetime Income Options and Deferred Annuities
To establish a guaranteed baseline for essential living expenses, individuals are incorporating modern fixed-indexed and deferred longevity annuities into their broader retirement architectures. Modern annuity structures offer competitive return caps, transparent fee schedules, and inflation-adjustment options.

By funding essential expenses—such as housing, healthcare, and insurance—with guaranteed income streams from Social Security, pensions, and annuities, retirees can manage discretionary investment portfolios with greater flexibility and lower emotional stress during market volatility.

Actionable Steps for Future Retirees
1. Calculate Baseline Retirement Expenses: Determine fixed living costs and map guaranteed income sources to cover essential expenditures.
2. Adopt Flexible Withdrawal Rules: Implement dynamic spending rules to protect investment principal against market downturns.
3. Incorporate Inflation-Protected Assets: Maintain exposure to dividend-growing equities and inflation-indexed bonds to safeguard long-term purchasing power.

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Building Generational Wealth: Family Governance, Estate Tax Optimization, and Asset Protection

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2 weeks ago

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August 1, 2026

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As the largest intergenerational transfer of wealth in history accelerates, high-net-worth families, entrepreneurs, and individual investors are placing heightened emphasis on comprehensive estate planning, family governance, and asset protection. Preserving capital across generations requires a balanced approach combining tax-efficient legal structures with open family communication and financial literacy education.

Optimizing Estate Tax Exemptions and Trust Structures
With potential modifications to federal estate tax exemption thresholds on the horizon, proactive estate planning is essential for high-net-worth households. Estate planning attorneys and wealth advisors are establishing multi-generational trust structures to transfer wealth efficiently while minimizing estate and gift tax exposure.

Popular structural strategies include:
– Irrevocable Life Insurance Trusts (ILITs): Utilizing life insurance proceeds to provide liquidity for estate tax obligations without expanding the taxable estate.
– Grantor Retained Annuity Trusts (GRATs): Transferring rapidly appreciating assets to beneficiaries with minimal gift tax consequences.
– Dynasty Trusts: Preserving wealth across multiple generations while providing long-term asset protection from creditor claims and legal liabilities.

Establishing Family Governance and Financial Education
Legal and financial structures alone cannot guarantee long-term wealth preservation without effective family governance. Financial advisors report that a significant percentage of multi-generational wealth dissipation stems from lack of communication and inadequate financial preparation among heir generations.

Families are establishing formal family governance frameworks, including periodic family meetings, written mission statements, and structured philanthropic foundations. Involving younger family members in charitable grant-making and investment discussions fosters financial stewardship and prepares heirs to manage family assets responsibly.

Digital Asset Custody and Legacy Planning
In today’s modern economy, estate planning must extend beyond physical real estate and traditional brokerage accounts to encompass digital assets. Comprehensive estate plans now include detailed inventories and legal access protocols for corporate domain names, intellectual property, digital media rights, and cryptocurrency holdings.

Fiduciaries and estate executors should be provided with secure, encrypted access mechanisms and clear legal authority to manage and transfer digital holdings in accordance with the owner’s estate directions.

Practical Steps for Legacy Planning
1. Review and Update Estate Documents: Ensure wills, revocable trusts, and power-of-attorney designations accurately reflect current family structures.
2. Establish Structured Trusts: Utilize irrevocable trusts to protect assets from creditors and minimize future estate tax liabilities.
3. Create a Digital Estate Inventory: Document access protocols and legal permissions for all online accounts, intellectual property, and digital assets.

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