AI Financial Advice: Supply, Demand, and Life Cycle Implications

Abstract

We develop and implement a novel method to study personal financial advice from Large Language Models (LLMs). Studying this advice is challenging because it depends on the model used (i.e., supply), the questions individuals ask (i.e., demand), and their evolving circumstances. We address these challenges by surveying a representative sample of adults and asking them to write prompts seeking spending and investing advice from an LLM. We then simulate the lifetime paths that result from following this advice under realistic asset and labor market conditions. Applying our method to GPT-5.2 and Gemini 3.0 Flash, we document three facts about AI-generated financial advice. First, following LLM advice would move most survey respondents closer to the prescriptions of life cycle theory relative to their current behavior, including broader participation in diversified equity funds, equity shares that decline with age, and sizeable saving buffers. Second, replacing individual-written prompts with academic prompts moves LLM advice even closer to life cycle theory, with better consumption smoothing and less reliance on simple heuristics. Third, LLM advice varies systematically with individual characteristics, such as gender and financial literacy. These differences accumulate over the life cycle into wealth differences at retirement of 4-5% between groups and reflect both demand (i.e., systematic variation in the prompts written by different individuals) and supply (i.e., differences in advice for a given prompt). These facts highlight the potential of generative AI to improve financial decision-making, but suggest that its impact is likely heterogeneous across households and depends on how the technology is used. Joint paper with Tim de Silva, Weidong Lin, and Matthew Akuzawa.