Your AI Chat Is Not Private
Remember that very long, very legalese-heavy terms and conditions agreement you accepted when you signed up for the AI chat account? No? Well, I’ll sum it up for you: Anything you say can and will be used against you in the court of data sales.
Ok, it wasn’t a Miranda warning. But it was something worth paying attention to because what you share with AI isn’t private.
It feels private because you’re sitting at your desk or talking into your phone. The chatbot is convenient and helpful, it remembers the thread, asks follow-up questions, and gives you a polished answer in seconds. Before long, you may be typing in details about your income, stock compensation, taxes, kids, health, or business to get even more personalized advice.
Imagine handing over those details to a stranger in a coffee shop after he or she tells you they know a thing or two about finance.
AI can be an excellent financial research assistant. I use it that way myself. But there are two separate questions you need to ask before you put personal financial information into a chatbot: How private is this conversation, and how much should I trust the answer?
The conversation may feel private. That does not make it confidential.
A useful reminder came earlier this year, when the Chat & Ask AI app exposed roughly 300 million messages tied to about 25 million users because of a misconfigured Firebase database. The lesson is not that every AI company is leaking your chats, but that anything stored on someone else’s servers carries some level of privacy and security risk.
👉 Five Minute Task: Open the privacy or data-control settings in the AI tool you use most. Check whether your chats can be used for model improvement, whether memory is on, and what happens when you delete a conversation.
Keep the crown jewels out of the prompt
You usually do not need to give AI your exact identity to get a useful financial answer. In fact, most of the time you can remove the details that create the most risk without removing the facts that make the question useful.
I would be especially cautious with Social Security numbers, account numbers, passwords, tax returns, W-2s and 1099s, brokerage statements, exact home addresses, confidential business information, and anything else you would hesitate to hand to an unknown person.
Instead of uploading a brokerage statement, describe the problem. Instead of naming the employer, say you work for a public technology company. Instead of giving an exact salary and account balance, use rounded numbers when precision is not necessary.
Think of it as telling an anonymized story “I have a friend…” You want enough context to make the question useful, but not enough detail to identify the person.
👉 Five Minute Task: Look at one AI prompt you have used for a financial question. Rewrite it using rounded numbers, no names, no account numbers and no uploaded documents. Save that version as your template for future questions.
A safer prompt can still be a much better prompt
Suppose you have $180,000 of restricted stock units vesting and you want to understand the tax impact. You could upload your brokerage statement, tax return, vesting schedule and salary information. That would give the chatbot a lot of context. It would also give the chatbot a lot of sensitive information.
A better starting point might look like this:
“I have a friend in their 40s, married, and they expect roughly $180,000 of RSUs to vest this year. Their household income is approximately $400,000. What tax and diversification questions should they understand before deciding whether to sell or hold the shares?”
That prompt is useful because it asks AI to identify the questions, tradeoffs and concepts you should understand. It does not ask AI to execute the decision for you. Nor does it identify your household income to be used as fodder for targeting advertising campaigns.
That distinction also builds on a point I made in AI Assistant ≠ AI Advisor: AI is strongest when it helps you research, organize and ask better questions. It is much weaker when you hand it judgment and ask, “What should I do?”
The bigger danger may be the confident answer
Privacy is only half the problem. The other half is that AI can give you a very plausible answer based on an incomplete picture.
Go back to the RSU example. Maybe the chatbot knows your income, vesting schedule and current tax bracket. But does it know your spouse expects a large bonus? That you plan to leave your job next year? That you need cash for a home purchase? That most of your net worth is already tied to the same company? That you have a charitable goal that could change the strategy?
You may not know which facts matter enough to include. AI usually will not know which important fact you forgot to mention. Yet the answer can still arrive sounding crisp, personalized and certain.
That is why I like AI for questions such as, “What factors should I consider?” or “What am I missing?” Those prompts help you learn. “Tell me exactly when to sell $180,000 of company stock” is a very different request.
👉 Five Minute Task: Before acting on an AI-generated financial recommendation, ask the chatbot: “What facts about this situation could materially change this answer?” Then make a short list of anything it identifies that you have not considered.
Use a human when the consequences become real
There is no magic dollar amount where AI stops being useful and a human suddenly becomes necessary. The better measure is consequence.
If you are learning how a 529 works, comparing definitions or brainstorming questions for your CPA, AI can save you a tremendous amount of time. If you are about to sell a concentrated stock position, make a large Roth conversion, exercise options, change an estate strategy, or make another move that could create a meaningful tax bill, that is the moment to get another set of eyes on the decision.
The higher the stakes, the less you want a confident answer built on missing context.
The same principle applies when you use AI for tax planning. In Tax Planning vs. Tax Preparation, I suggested that an anonymized tax return can help surface ideas worth investigating. The key words are worth investigating. AI can flag a possible opportunity. Your tax professional or adviser can help determine whether it actually fits your full situation.
👉 Five Minute Task: Pick one financial decision you expect to make in the next 90 days. If a wrong answer could cost meaningful money, taxes or flexibility, put a five-minute appointment request on your calendar for the appropriate CPA, attorney or financial adviser before you act.
Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
