Personal Finance
AI has a big problem when it comes to financial advice: MIT professor
Insta_photos | Istock | Getty Images
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
Sdi Productions | Istock | Getty Images
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.
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.
The Federal Reserve held interest rates steady at the conclusion of its policy meeting on Wednesday.
In what could be Jerome Powell’s last as chair before President Donald Trump’s yet-to-be-confirmed nominee Kevin Warsh takes the helm, central bankers maintained the federal funds rate in a target range of 3.5% to 3.75%.
Inflation has surged since the war with Iran began, leaving policymakers with limited room to act, according to Sean Snaith, the director of the University of Central Florida’s Institute for Economic Forecasting. “We’re in a kind of suspended animation — between Iran and the Fed transition,” Snaith said.
Before the oil shock, inflation was holding above the Fed’s 2% target but not worsening. Now the jump in energy costs could have longer-term inflationary effects, economists say.
For Americans struggling in the face of higher gas prices and overall affordability challenges, the central bank’s decision to keep interest rates unchanged does little to ease budgetary pressures. “The cavalry isn’t coming anytime soon,” Snaith said.
How the Fed decision impacts you
The Fed’s benchmark sets what banks charge each other for overnight lending, but also has a trickle-down effect on many consumer borrowing and savings rates.
Short-term rates are more closely pegged to the prime rate, which is typically 3 percentage points above the federal funds rate. Longer-term rates, such as home loans, are more influenced by inflation and other economic factors.
Credit cards
Most credit cards have a short-term rate, so they track the Fed’s benchmark.
After the Fed cut rates three times in the second half of 2025, the average annual percentage rate has stayed just under 20%, according to Bankrate.
“Without Fed rate cuts, there’s not much reason to expect meaningful declines anytime soon, so carrying a balance will remain very expensive,” said Matt Schulz, chief credit analyst at LendingTree.
Mortgage rates
Fixed mortgage rates, on the other hand, don’t directly track the Fed but typically follow the lead of long-term Treasury rates.
Concerns about how the Iran war will impact the U.S. economy have already pushed the average rate for a 30-year, fixed-rate mortgage up to 6.38% as of Tuesday, from 5.99% at the end of February, according to Mortgage News Daily.
That leaves homeowners with existing low mortgage rates “feeling stuck,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “Mortgages, more than any other credit type, work on a churn,” she said, referring to how a dip in rates can boost borrowing activity.
Student loans
Federal student loan rates are also fixed and based in part on the 10-year Treasury note, so most borrowers are somewhat shielded from Fed moves and recent economic uncertainty.
Current interest rates on undergraduate federal student loans made through June 30 are 6.39%, according to the U.S. Department of Education. Interest rates for the upcoming school year will be based in part on the May auction of the 10-year note.
Car loans
Auto loan rates are tied to several factors, including the Fed’s benchmark. Because financing costs remain elevated, new car buyers are taking on longer loans to keep their monthly payments manageable, according to the latest data from Edmunds.
Even so, with the rate on a five-year new car loan near 7%, the average monthly payment on a new car rose to $773 in the first quarter of 2026, an all-time high.
“Car buyers are in a tough spot right now because they’re getting squeezed from both ends: high sticker prices and high interest rates, with neither showing any signs of letting up,” said Joseph Yoon, consumer insights analyst at Edmunds.
“Until the rate picture shifts, buyers will keep stretching loan terms to make payments work, which only adds to the total cost of ownership down the road,” Yoon said.
Savings rates
While the Fed has no direct influence on deposit rates, the yields tend to be correlated with changes in the target federal funds rate. So, although rates on certificates of deposit and high-yield savings accounts have fallen from recent highs, they are holding above the annual rate of inflation.
For now, top-yielding online savings accounts and one-year CD rates pay around 4%, according to Bankrate.
“Yields on high-yield savings accounts and certificates of deposit are down from their peaks of a few years ago, but they’re still strong compared to what we’ve seen for most of the past decade,” Schulz said.
Milan Markovic | E+ | Getty Images
The average tax refund is 11.2% higher this season, compared with about the same period in 2025, according to the latest IRS filing data.
As of April 10, the average refund amount for individual filers was $3,397, up from $3,055 about one year ago, the IRS reported on Friday.
The IRS data reflects about 114 million individual returns received, out of about 164 million expected through Tax Day. Next week’s filing update is expected to include data through the April 15 deadline.
President Donald Trump‘s 2025 legislation, rebranded to the “working families tax cuts,” was a key talking point for Republicans on Tax Day.
With the November midterm elections approaching and Republicans defending slim majorities in Congress, many GOP lawmakers have highlighted Trump’s tax breaks and higher average refunds.
Meanwhile, affordability has been top of mind for many Americans amid rising costs of gas, electricity, food and other living expenses.
For filers who expected a refund this season, nearly one-quarter, or 23%, planned to use the funds to pay down credit card debt, and the same share said they would save the payment, according to the CNBC and SurveyMonkey Quarterly Money Survey, released in April. It polled 3,494 U.S. adults at the end of March.
Who benefited from Trump’s ‘big beautiful bill’
“It’s been a great tax season for the American people,” many of whom have benefited from Trump’s tax breaks, Treasury Secretary Scott Bessent said during a White House press briefing on Wednesday.
More than 53 million filers claimed at least one of Trump’s “signature new tax cuts” — the deductions for tip income, overtime earnings, seniors and auto loan interest — the Department of the Treasury also announced on Wednesday.
Those filers, who claimed the deductions on Schedule 1-A, have seen an average tax cut of over $800, according to the Treasury. Tax cuts can trigger a higher refund or reduce taxes owed, depending on the filer’s situation.
Some filers who itemize tax breaks have also seen benefits from the bigger federal deduction limit for state and local taxes, known as SALT. Trump’s legislation raised that cap to $40,000, up from $10,000, for 2025.
The latest SALT deduction limit change is expected to primarily benefit higher earners, according to a May 2025 analysis of various proposals from the Tax Foundation.
The Treasury has not released data on how many filers have claimed the SALT deduction during the 2026 filing season.
Traders work at the New York Stock Exchange on April 16, 2026.
NYSE
U.S. stocks climbed to record highs on Thursday against a backdrop of war, an oil supply shock and economic forecasts warning of stunted growth amid a protracted conflict.
Many investors may be thinking: Why?
Largely, it’s because the stock market is a barometer of what investors think will happen in the future, rather than an assessment of the present day, according to economists and market analysts.
Investors are essentially shrugging off the Middle East conflict as a blip that will be resolved relatively quickly, they said.
“The stock market isn’t trying to price what’s happening today,” said Joe Seydl, a senior markets economist at J.P. Morgan Private Bank. “The stock market is always trying to price what the world is going to look like six to 12 months from now.”
Why stocks have been ‘resilient’
The S&P 500, a U.S. stock index, fell about 8% in the initial weeks of the Iran war, from the start of the conflict on Feb. 28 to a recent low on March 30.
But stocks have rebounded since then, erasing all losses since the beginning of the war. The S&P 500 closed at an all-time high on Thursday — about 11% higher than its nadir at the end of March. That followed a record close on Wednesday.
“The market has remained very resilient in the face of the war and has rallied strongly on the prospect that it will be resolved,” said Mark Zandi, chief economist at Moody’s.
A ship waits to pass through the Strait of Hormuz following the two-week temporary ceasefire between the US and Iran, which is conditional on the opening of the strait, in Oman on April 8, 2026.
Shady Alassar | Anadolu | Getty Images
And while investors cheered the possibility of a diplomatic off-ramp to the conflict, the temporary ceasefire has appeared tenuous, with the U.S. and Iran each accusing the other of breaking the agreement.
Nations haven’t been able to reach a peace deal ahead of the ceasefire’s end. Vice President JD Vance said U.S. officials left peace talks in Pakistan over the weekend after the Iranian delegation refused to agree to American demands not to develop a nuclear weapon.
The markets ‘have memory’
Ultimately, the stock market is signaling a collective belief that tensions will ratchet down, the war will end in the near term and oil flows through the Strait of Hormuz will normalize, economists said.
That’s largely because investors have been conditioned to believe that President Donald Trump will back off if the economic pain becomes too intense, economists said — the so-called “TACO” trade, shorthand for “Trump always chickens out.”
“Investors strongly believe — and have been conditioned to believe — he’s going to stand down, find a way to pivot, declare victory and move on,” Zandi said.
Trump has pushed back on the notion of backing down, framing his brinkmanship as a savvy negotiating tactic.
Economists pointed to a recent example of this dynamic: in April 2025 during so-called liberation day, when the Trump administration levied a host of tariffs on U.S. trading partners.
Within days — after the stock market had cratered more than 12% — Trump announced a 90-day pause on those tariffs. Stocks then saw one of their biggest daily rallies in history following Trump’s reversal.
Investors remember that Trump often de-escalates geopolitical shocks — which is why they’ve seized on positive headlines that hint at progress in peace talks, for example, Seydl said.
“The markets have memory,” Seydl said.
AI stocks and the ‘tech boom’
Traders celebrating at the New York Stock Exchange on April 15, 2026, as the S&P 500 closed above the 7,000 level for the first time.
NYSE
There are other factors underpinning market resilience during wartime, economists said.
One is the investors’ enthusiasm for artificial intelligence and technology stocks, which account for almost half of the S&P 500’s market capitalization, Zandi said.
“Those stocks run on their own dynamic independent of anything, including the war in Iran,” Zandi said. “I think we would have been down a lot more and it would have been harder for us to recover had it not been for the very, very optimistic perspectives on AI.”
We’re in the middle of a “tech boom” — and investors are likely to remain optimistic until they think the tech cycle has run its course, Seydl said.
More broadly, stock investors are essentially making a bet on the future earnings growth of a company — and the earnings backdrop has been “pretty solid,” Seydl said.
Consumer spending appears to be stable, for example, economists said. And companies are getting a boost to their after-tax earnings from the GOP’s so-called “big beautiful bill,” which, among other things, made it easier to write off investments upfront and therefore reduce their tax liability, Zandi said.
Going forward
Experts said there will be an economic hit from the Iran war, though.
“Despite the recent news of a temporary ceasefire, some damage is already done, and the downside risks remain elevated,” Pierre-Olivier Gourinchas, director of research at the International Monetary Fund, wrote Tuesday.
A protracted conflict risks deep and global economic pain, he wrote.
Even if the conflict is short-lived — as the broad market expects — stocks are unlikely to march much higher until it’s clear the U.S. is on the other side of the war and its economic fallout, Zandi said.
If investors are incorrect, and President Trump doesn’t back down or quickly extricate the U.S. from the war, the stock market may see a “full-blown correction” or worse, Zandi said. A stock market correction is a decline of at least 10% from recent highs.
“Everyone thinks they know what the script is,” Zandi said. “Now they just need to follow the script. If they don’t, the market will have some real problems.”
The uncertainty provides yet another example of why the average investor with a long time horizon should stick to their investment plan and ignore the noise, experts said.
“Trying to time the market is very difficult if not impossible for the average investor,” Seydl said. “It’s better to take a long-term perspective and ride out bouts of volatility.”
What that means for consumer loans
Checks and Balance newsletter: Of God and MAGA
Why software stocks, 2026’s market dogs, have joined the rally
Armanino adds Strategic Accounting Outsourced Solutions
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
