Can financial advice be replaced by ChatGPT?

Oliver Wickham March 22, 2023 16:58

Since its launch in November last year, ChatGPT has gripped the public imagination, with over a hundred million users trying out the AI’s ability to produce coherent content, from simple explainers to lengthy maths equations recast in rhyming verse.

Financial adviser of the future?

ChatGPT can understand questions and it produces fluent, well-informed answers highlighting two key elements of ChatGPT’s genius – its advanced communication skills and its ability to almost instantly synthesise useful information from a seemingly infinite quantity of online data.

What we know it cannot do however, is to provide personalised solutions – which is important when it comes to financial and wealth planning. In fact, given the vast amount of unvalidated information available on the internet, it is still too early to determine whether ChatGPT can replace human decisions when it comes to wealth.

Robo Advice no substitute for personalised advice

Despite the robo-advisor revolution from 2008 onwards that has become part of daily life, ChatGPT goes much further in being able to provide a slew of information and general financial knowledge just by asking it a simple question.

But its impact on wealth planning will be limited. ChatGPT is not trained to analyse statistics, so it cannot assess investment data accurately enough to make reliable decisions on investments and markets. It is simply trained to generate words based on a given input and is constrained to sharing information that it can curate from various sources to which it has access, without being aware of the accuracy of its own conclusions.

When it comes to financial planning, ChatGPT does not account for an individual’s circumstances and is unable to judge or foresee the cost of inflation or unique situations like a person’s life stage, retirement goals, inheritance, children’s education or elderly care and how all of these factors might change a wealth portfolio.

It is also unable to offer an approach or solutions uniquely tailored to an individual current financial situation or future goals.

Asking the right questions to make informed decisions

Chatbots like ChatGPT will only have the information a user provides as the basis of a financial plan, and it is not equipped to ask users probing questions about their finances, which could lead to missing pieces of the puzzle.

No technical tool yet can assess the questions that need to be asked in relation to people’s personal circumstances. It is also not able to address the needs and future goals for investors that can support the best plan that can lead to a better financial outcome over the longer term.

There is a stark contrast between asking a chatbot for investment advice and sitting down with a professional human financial planner who will take into account an investor’s specific goals and who is able to provide objectivity in uncertain situations.

ChatGPT might be able to provide a general knowledge about the financial landscape, relevant concepts and strategies, but financial advisors have the ability to factor in the complexities of the financial world, advise on how to avoid the pitfalls of emotional investing and make the most out of money in the long run, which research shows is linked to happiness and financial wellbeing.

Investment advice that has stood the test of time

The value of personalised advice will always be measured against the risk of the unknown. Investors often seek advice when they are facing uncertainty – from divorce, inheritance, multi-jurisdictional tax issues, rising costs of caring for their children and parents at the same time and planning for wealth transfer. We know that through human interaction, listening and being able to adapt the financial plan to unique goals gives investors the best chance of success.

Based on our experience, there is no easy way to plan for the future but by having a plan, being asked the tough questions and taking time to set goals – qualified professionals will always beat technology hands down.

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Oliver Wickham

CEO, St. James's Place (Hong Kong)