ChatGPT Won’t Replace Financial Advisors Yet. Here’s why.

OpenAI, an artificial intelligence laboratory, launched ChatGPT on November 20, 2022. The internet has been buzzing with conversations about how advanced AI can reshape society, including the financial services sector, in the months that followed.

ChatGPT is an AI that some people view as a tool to increase productivity. Others see them as competitors in the job marketplace.

A financial advisor and a machine-learning engineer discuss the future of AI and financial services. ChatGPT also has some thoughts.

ChatGPT stands for “chat-generative pretrained transformer” and is an AI program. This is an example of a large-language model, or LLM. AAI engineers love acronyms. )

An LLM, in simple terms, is a program capable of responding to messages using patterns learned through training materials. ChatGPT’s training material includes hundreds of gigabytes data and billions words of text taken from books, websites, and other sources.

ChatGPT and other AI programs can learn human languages and code languages. They can also remember information in a way that humans cannot. Some people are concerned that AI will eventually take away many jobs, including those in “knowledge” fields.

McKinsey, a consulting firm, published a report in November 2017, five years prior to the launch of ChatGPT. It estimated that automation could replace between 400 million-800 million workers worldwide by 2030.

Some knowledge-based professions such as financial journalism have been affected by LLMs. CNET, a technology website, announced in January 2023 it had published several dozen AI written personal finance articles.

ChatGPT was asked a series personal finance questions by the author to see if financial advisors might be next.

ChatGPT is, however, modest about its financial advisory capabilities. It stated in a written interview that it is a language model AI and can provide insights and information on personal finances, but cannot give personalized financial advice.

ChatGPT was consulted by the author to give consent for it to be quoted in this article. It stated that it had no personal opinions or control over its use, but it did request that the comments be attributed to ChatGPT/OpenAI. )

These are quotes from ChatGPT and the author, along with comments by Rick Nott (a registered financial planner with LourdMurray, a California-based registered investor advisor).

ChatGPT began its answer by recommending employer sponsored retirement plans such as 401(ks) and a traditional or Roth IRA.

A traditional IRA allows for tax-deferred growth and tax-deductible contributions. However, a Roth IRA allows for tax-free withdrawals during retirement.

The report also suggested index funds and individual stocks as well as exchange-traded funds. It advised caution when choosing individual investments.

ChatGPT stated that it is important to do research and work with a financial adviser to create a diversified investment portfolio.

Nott noted that, although the question was asking for “some of best investments”, ChatGPT’s first two responses — 401(k), individual retirement accounts and — are investment methods. Only the last two — individual stocks or ETFs — are actually investments.

It answered the prompt technically. However, it might seem a bit confusing to someone who doesn’t have the necessary knowledge,” Nott stated.

ChatGPT recommended keeping records and receipts. He also suggested that you “claim all eligible deductions such as charitable donations and mortgage interest and work-related expenses.” It was noted that medical expenses which exceed a certain percentage could be deducted.

The AI recommended that you contribute to a 401k or IRA, take advantage of tax credits like the earned income tax credit (or child tax credit), and adjust your withholding.

ChatGPT stated that if you have received a large tax refund, you might be able adjust your withholding to ensure you get more money throughout the year.

In an email interview, Nott stated that these answers were “not complete.” ”

“The standard deduction is generally higher than itemizing for most people. In other words, if you take all deductions, you may inadvertently receive less tax refund. He also said that medical expenses are only relevant if you itemize deductions.”

He stated that ChatGPT’s position on withholding was “probably the best, most broadly-applicable solution,” but it is missing some crucial caveats.

Nott stated that this doesn’t cover 1099/independent contractors, who may not have had taxes withheld. They might have to make estimated tax payment.

ChatGPT’s answers were generally described by Nott as “70% to 80% accurate.” ”

Nott stated that he doesn’t worry about losing his job to ChatGPT.

Financial advisors need to understand the clients’ “needs and values” in order to be able to provide a holistic financial service.

“This is a therapist-style way of asking questions. He said that there is a vulnerability that can be elicited through the initial conversation.

Nott doesn’t believe humans will trust AI enough to be vulnerable.

He stated that unless humans feel comfortable with AI, it will be a poor driver for the wealth advisory activities we are really doing.

Matthew Alhonte, a machine-learning engineer at Actium Health, has worked on AI model development. In a written interview, he stated that trust may not be a problem for hypothetical AI financial advisors.

Alhonte stated that studies show people are more likely to tell the truth with machines than they are with people.

This claim is supported by a 2014 study done by the Institute for Creative Technologies and Bard College. The study found that patients who were interviewed for health screening had a lower fear of self-disclosure when told the interviewer was an automated program.


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Alhonte pointed out that an LLM could have human-curated data trained to ask sensitive questions about financial planning such as, “Do you have any dependents with disabilities who would need to retire from your savings?” ”

He disagreed with the popular perception that AI is robotic. ChatGPT LLMs, he said, are “actually quite good at emulating tone and style of writing” which can help AI financial advisors build trust with their clients.

“It is possible that advanced AI technology will play a role within the financial advisory industry in future.” ChatGPT stated that AI technology will not replace financial advisors.

However, the AI industry is booming and it’s possible that the “advanced AI technology” may be within reach.

ChatGPT was released only a few months ago. OpenAI CEO Sam Altman spoke to StrictlyVC and said that OpenAI may release GPT-4, the successor of the GPT-3.5 LLM which powers ChatGPT. Google is also testing a ChatGPT competitor that uses an LLM-based ChatGPT LLM called Bard. It will allow developers to integrate Bard into their products and then open it up to the public “in coming weeks.” ”

ChatGPT seems to be in agreement with Nott for the moment that certain aspects of financial advisor work need human touch.

Financial advisors must have “emotional intelligence, empathy and the ability build trust and rapport,” which are qualities that AI cannot duplicate. ”