AI can be a powerful tool for research, analysis, and task automation. It’s now the first thing many people turn to when stumped with a question or in need of guidance. But increasingly, AI is being relied on for more serious, complex matters—including those an Abbotsford, B.C.-based financial expert says require a level of nuance and understanding that even a super computer can’t provide.
Bharathi Sandhu, a senior business development specialist at Nava Wealth of Raymond James Ltd., has worked in wealth advisory for more than 20 years. But in recent years, she’s noticed an influx of people relying on AI for things, such as financial guidance and filing taxes.
It’s a useful tool to help you build knowledge around financial topics, she says, but people should be wary about relying too heavily upon it. This is especially true for cottage owners, whose financial situations are inherently more complex as cottages are more often than not secondary properties. Throw succession planning and co-ownership into the mix, and it becomes more important than ever to lean on licensed professionals for guidance.
Why are more and more people turning to AI for financial guidance?
“We go to AI because it’s quick, it’s easy, and it’s free. It can summarize a 3,300 page Income Tax Act in a minute. Its responses are also ridiculously confident, and to an untrained eye, whatever it’s saying sounds accurate. These are all very fair reasons for people to want to go to AI for financial guidance. And whether it’s accounting, whether it’s tax, whether it’s legal, medical, they’re rushing to it. I definitely get the allure.”
How does AI miss the mark, and why?
“Taxes, for example, are very jurisdictionally specific, and AI often pulls from outdated or U.S.-based tax laws. Even between B.C. and Ontario, there’s a lot of tax nuance that’s different, and things are often missed, including tax thresholds, income thresholds, and attribution rules. Those are ever-changing, dynamic items that many people don’t even think to ask AI about. And because what you put in is what you’re going to get out with AI, even if you put in 100 per cent correct information, there’s no guarantee that what you’re getting out of it is accurate.
When it comes to financial guidance, AI also isn’t aware of important contextual factors, such as your debt situation, the state of the market, or your capacity for risk. This can lead to generic advice that is technically correct, but not tailored to the person asking for it.”
Can you describe a scenario where AI is likely to fall short?
“If the original two owners of a cottage get divorced or pass away, things can get tricky. Especially if there are new spouses and children involved. I’d encourage people to turn to a trio of a licensed financial advisor, an accountant, and a lawyer to help with these complex situations, as opposed to AI.
It’s important to be prepared and follow through with thorough documentation executed by professionals in these cases, because once the owners pass, things can become even more difficult. Forty-two per cent of cottage owners plan to pass the property down to the next generation, but only eight per cent of the heirs plan to keep it. And it’s often not about money or not wanting to keep it, it’s a lack of planning.”
Why is it especially important for recreational property owners not to rely on AI for things, such as taxes and succession planning?
“I can almost guarantee that in most cases, a cottage is a secondary property. So there is 100 per cent going to be a tax consequence in selling it. AI is not going to take account of any other income. It won’t consider if you have rent income, CPP, or old age security. What does your taxable income look like? Are you going to incur a capital gain from something else that would make you postpone this decision for a year or two, or six? Who knows? But AI won’t even think to ask you those questions. It’s also not always up to date on the real estate market, liquidity, or where the interest rates are going, which can affect outcomes at time of sale.
I find another shortcoming is AI’s absolute inability to assess family dynamics. If you’re looking into cottage succession planning, it might instruct you to make a family agreement. But who’s going to adhere to it? Who’s going to follow through? Who’s going to be taking care of maintenance costs? How do you split time there in the summer? These are super important questions that a professional would be trained to ask and help a family navigate.”
Is there a safe way to use AI for financial guidance?
“There’s absolutely a safe way to use AI for financial advice, and it’s to help you generate better questions for your professional advisors and open your eyes up to risks and what-if scenarios. If you have an article or report you want to understand better, pumping that into AI is also useful. But it shouldn’t be the final word on how you’re going to transfer a secondary property to the next generation, for example. I would say use it as a starting point.”
Need help getting started on your succession planning? Sign up for Family Matters, our free five-part newsletter featuring advice from leading succession expert and lawyer Peter Lillico.
Related Story Cottage Q&A: Right of survivorship for passing down the cottage
Related Story What cottagers need to know about changes to the Underused Housing Tax ahead of 2025 tax filing
Related Story Cottage Q&A: Building receipts and the capital gains tax