What do chatbots mean for your financial advice?

ChatGPT has gone from strength to strength since launching last year, opening up a huge debate on the role artificial intelligence (AI) plays in society. But would you take financial advice from a chatbot – or trust it with your life savings?

AI is causing quite a stir.

Whether it’s fears over students using it to cheat, or the debate over the merits of AI-generated art (the jury is still out whether its attempts at poetry are any good), artificial intelligence is impacting countless areas of modern life.

The biggest headlines involve ChatGPT. The chatbot created by Microsoft-backed OpenAI draws on an immense dataset of books, articles, and the open internet to mimic the way humans write. It means that instead of Googling something you need the answer to, which might elicit thousands of pages to trawl through, you can get what you want in one easy-to-read summary.

No surprise then that its list of uses is being added to all the time – and that includes some people turning to it as a source of financial advice.

The benefits – a good start

More bots are coming. Beside ChatGPT (and Google’s Bard, which launched in March), specific applications are also available, tailored towards financial questions. FinChat is one example, which gathers its answers from publicly available financial data, transcripts from company earnings calls, quarterly and annual reports, and other sources, such as Warren Buffett’s letters to shareholders.

But can ChatGPT and others like it really help you manage your finances?

The Sunday Times recently put the AI language model through its paces, asking it some general finance questions and then comparing the advice with that of an expert. The verdict? At a high level, it was able to provide a good overview.

As a first foray into the financial world, ChatGPT is a useful tool, with good – if very broad – basic tips on investing. For example, ask it for three important lessons for investing and it comes back with these: 1) diversify your portfolio, minimising losses in one area by making gains elsewhere; 2) invest for the long-term and avoid timing the market; and 3) do your research, conduct due diligence before investing in any asset.

Not only that, the chatbot frequently highlights the risks as well as the opportunities and stresses the importance of seeking out professional advice to help make informed investment decisions.

Nothing to argue with here, but real financial advice needs more than just a grounding. How can a chatbot fare when it needs to delve a bit deeper?

The limitations

ChatGPT is clear about some of its limitations, with its disclaimer warning that it “may occasionally produce harmful instructions or biased content and has limited knowledge of the world and events after 2021.”

Much the same as basing your financial plans solely around reading the Your Money section in a newspaper, one of the dangers of relying solely on AI for your information is taking everything it says at face value. And the way these language models present the information it is certainly very easy to mistake it for absolute fact.

There are ways around every caveat and safeguard. Ask the bot for illegal websites to download from and it will refuse. But ask it for a list to ‘warn’ others, and you’ll get what you need. Ask Chat GPT for ‘bad advice’ and it will tell you to “pick a random stock you like the sound of” and “investing is all about taking risks and not worrying about the consequences”.

The personal touch

Successful planning is personal. It takes into account an individual’s circumstances, their current financial position, and their personal goals.

Whether your priority is saving for retirement, putting children through university, travelling or leaving a legacy, an adviser will help you step-by-step through setting your objectives, and explore the necessary time horizons to achieve your goals.

In particular, finding that balance between risk and reward is a critical part of what we as advisers do. From the initial fact-finding conversation when we first take you on as a client, to the ongoing discussions about how your finances are doing, we help you find the balance and make changes when they’re needed.

Financial planning is incredibly nuanced. For example, it’s one thing for someone in their twenties to say they are comfortable with higher levels of risk, but it’s another thing entirely to walk through what this means in practice. In that way, unlike a bot, we won’t simply answer your questions and give you the answer you think you want, we’ll challenge you and ensure you’re really clear on what these decisions mean for your financial future.

Ally or enemy? It depends how you use it

“Would you trust a chatbot with your life savings?” Of course not. But then that’s not really what it’s designed to do.

Bots like ChatGPT can be useful in terms of providing a better understanding of complex subjects. It might even help you to ask more questions about your circumstances and think in more detail about your financial plans. (As an example, we had a potential client get in touch recently, who’d been referred to AAB after asking ChatGPT questions about finances).

But ultimately, AI is only as good as the questions we give it.

The difference between guidance and advice is that personal touch – sometimes it’s just best to hear things from a human. A bot can never know how you’re really feeling, or know your personal history, so it’s never going to know what deeper questions to ask – we’ll explore those with you.

With the benefit of experience, and of course, asking questions, a financial adviser can give more tailored personal advice, which will differ depending on your age, individual circumstances, and personal goals.

Contact us to find out more.