- Generative artificial intelligence is a technology that uses algorithms to create new content. That includes essays, lyrics, art, and more, as well as financial advice.
- A survey by the CFP Board found that 31% of investors are reluctant to take AI financial advice without prior verification.
- AI output is not always reliable. Also, knowing what questions to ask an AI chatbot can be difficult, especially for those with complex financial lives.
Jakub Porzycki/NurPhoto (via Getty Images)
Nearly one in three investors could use artificial intelligence as a financial advisor, according to a new study, which could lead to poor advice, experts say.
Specifically, a poll by the Board of Standards for Certified Financial Planners, the body that governs the CFP designation of financial advisors, found that 31% of investors questioned preferred financial advice from a generative AI program. They said they felt safe implementing the advice without prior verification from another source. .
“This is a bit concerning,” CFP Board Chief Executive Kevin Keller said.
Simply put, AI is technology aimed at mimicking human intelligence. Generative AI uses algorithms to create new content such as essays, lyrics, art, photos, computer code, or in this case, financial advice.
ChatGPT, a program that has gone viral since it went public late last year, is an example of generative AI.
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Those seeking financial advice can use such programs to ask financial questions and prompts.
Consider the following prompt example from Keller: “Create an asset allocation for his 62-year-old male investor with a moderate risk tolerance.”
The algorithms behind generative AI compile data to create responses from sources such as the internet, and those data sources can be unreliable. According to McKinsey & Co, the quality of the results depends on the quality of the model.
“The output is not always accurate or appropriate,” said the consulting firm. I have written Generate AI’s.
“ChatGPT seems to have difficulty counting, solving basic algebraic problems, or trying to overcome the sexist and racist prejudices that lie in the wider undercurrents of the internet and society. They seem to be struggling too,” he added.
In other words, financial advice output is not always 100% reliable.
Of course, technology and algorithms are nothing new to investors. And so is the skepticism surrounding the technology.
So-called robo-advisors, which use algorithms to automate asset allocation to investors, began appearing around the 2008 financial crisis. Their growing popularity has raised questions about whether they can provide advice on par with human financial advisors.
Investors, especially those with relatively complex economic lives, face additional hurdles when it comes to AI. It’s hard to work with AI if you don’t know what questions to ask in the first place. I have written Michael Kitches, CFP and Head of Planning and Strategy at Buckingham Wealth Partners, said:
“Have you ever logged into ChatGPT and tried to ask a question only to sit back and wonder, ‘What should I ask the AI chatbot?’ Try it, but now you have to ask the right questions because your financial savings are at stake.”
It’s the Wild West.
CEO of CFP Board
Perhaps counterintuitively, younger investors seem to be more wary of AI outcomes than older investors. According to the CFP, 62% of investors over the age of 45 said they were “extremely satisfied” with getting financial advice from generative AI, compared to those under the age of 45. answered 38%. Council poll.
But experts say older investors who are retiring or close to retirement generally have more complex financial situations and need better advice.
After all, DIY investors have always existed and will continue to exist, Keller said. Those who use AI for financial advice should “trust but verify,” he said.
“It’s the Old West,” he added.