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Advisors are using AI without really understanding what’ s going on under the hood. By Matt Halloran

I asked him one question.“ Do you know what happens to your client’ s information the second you paste it into that chatbot?” There was a long pause. And not a good one. That’ s the knowledge gap I keep running into. Plenty of advisors are using AI, and doing so with much confidence. But do they understand what’ s actually happening under the hood? Not so much.

For that reason, we thought it helpful to offer 10 things about AI you need to know. The knowledge might change the way you use this technology.

1. Artificial intelligence will make things up and sound completely confident when doing so.

This is not a glitch. It is how the tool works. It is built to give you an answer, even if it is wrong. When AI does not have a real answer, it often generates something merely plausible instead: a made-up statistic, a regulation that does not exist, a historical detail that was never true.

And worse yet, this tendency is not flagged. The technology says wrong things with the same confidence it does correct things.

What to do: That means you should treat every fact, figure and citation from AI as a draft that needs your verification. Every time.

2. Free chatbots are not a safe vault for your information.

When you paste sensitive data— perhaps a client’ s personally identifiable information— into a chatbot that you have open in one of your tabs, your input does not just disappear after you get the information you want. That data can get stored, reviewed by the company and used to train the next version of the model. It’ s become a data point that helps the AI get smarter for the next user.

You would never photocopy a client’ s file and hand it to a stranger on the street. Yet pasting sensitive details into the wrong AI tool is doing something very close to that. It might not feel that way, since you can’ t see it, but it’ s happening.

What to do: Before you copy anything into an AI portal, ask yourself: Did my firm choose this tool? Perhaps because it’ s a version that protects client data? Or is this a free app I downloaded because it was easy? If you aren’ t sure, don’ t paste anything. Ask your compliance officer or your IT specialist which tools are actually cleared for client information, and then keep a running list.

3. Garbage in is still garbage out. I say this one a lot because it’ s still true. The answer you get from an AI chatbot is only as good as the question you asked.

I have been teaching financial advisors communication skills for 20 years, and one of the things I go over is the issues that arise when they ask vague questions. If you ask a client something vague, they will likely want you to repeat the question, only this time in a different way and with more specifics.

AI won’ t even give you that feedback. If you type something vague into it, you’ ll just get something vague back. That will change

30 | FINANCIAL ADVISOR MAGAZINE | SEPTEMBER / OCTOBER 2026 WWW. FA-MAG. COM