Artificial Intelligence Laboratory OpenAI launched ChatGPT in November 2022. Since then, the internet has been buzzing with discussions about how advanced AI could reshape society. This also includes the financial services industry.
Some see AI like ChatGPT as a productivity tool, while others see it as a potential competitor in the job market.
Here’s what financial advisors and machine learning engineers are thinking about the future of AI in financial services, and what ChatGPT itself is saying.
What is ChatGPT?
ChatGPT is an AI program that stands for “chat generative pretrained Transformer”. This is an example of a large language model or LLM. (AI engineers love acronyms.)
Simply put, LLM is a program that can respond to messages using patterns learned from training materials. ChatGPT’s training materials contain hundreds of gigabytes of data and billions of words of text from books, websites, and other sources.
Can AI like ChatGPT take people out of their jobs?
AI programs such as ChatGPT can learn human language and coding language and won’t accidentally forget information like humans do. With that in mind, I worry that AI will automate many jobs in the coming decades, including “knowledge jobs” previously considered safe from traditional factory robot-style automation. Some people
In November 2017 (five years before ChatGPT’s launch), consulting firm McKinsey estimated that automation could displace 400-800 million workers worldwide by 2030. published a report.
LLMs have already made inroads into some knowledge-based professions such as financial journalism. For example, technology website CNET announced in January 2023 that it will publish dozens of personal finance articles written by AI.
To see if a financial advisor could be your next candidate, the author of this article asked ChatGPT a series of personal financial questions.
Does ChatGPT provide good financial advice?
ChatGPT, on the other hand, is modest about its financial advisory capabilities. “As a language model AI, it can provide information and insights about an individual’s finances, but it cannot provide personalized financial advice,” he said in a written interview.
(The author sought consent from ChatGPT for quoting in this article, stating, “I have no personal opinion and cannot control their use.”) , requested that the comment be attributed to ChatGPT and OpenAI.)
Below are some excerpts from a conversation between the author and ChatGPT, including comments from Rick Nott, a certified financial planner at California-based registered investment advisor LourdMurray.
Question: “What is the best investment for a young person who wants to start saving for retirement?”
ChatGPT began its response by recommending an employer-sponsored retirement plan such as a 401(k) or a traditional IRA or Roth IRA.
“Traditional IRAs offer tax-deductible contributions and tax deferred growth, while Roth IRAs offer tax-free withdrawals upon retirement,” it said.
He also recommended index funds, suggested individual stocks and exchange-traded funds “if you’re comfortable with a higher level of risk,” and urged caution when choosing individual investments.
“Be sure to do your research and consider working with a financial advisor to develop a diversified investment portfolio,” says ChatGPT.
Nott said that while the question asks for the “best investment”, ChatGPT’s first two answers — 401(k)s and personal retirement account — are investment methods, but only the last two — individual stocks and ETFs — are real investments.
“Technically, we answered the prompt correctly, but it can be a little confusing for people who don’t have the necessary knowledge,” said Nott.
Question: “How can I increase my income tax refund?”
ChatGPT suggests that you keep records and receipts and make sure you “claim all eligible deductions, including charitable donations, mortgage interest, state and local taxes, and work-related expenses,” and medical expenses. pointed out that “above a certain percentage of income.” ” can also be deducted.
“If you receive a large refund this year, you may be able to adjust your tax withholdings so that you receive more pay throughout the year rather than waiting for a large refund at the time of tax payment,” said ChatGPT. I’m here.
In an email interview, Knott said those responses were “not complete.”
“For most people, the standard deduction is higher than the itemization. It only matters if you itemize the deduction,” he said.
He said ChatGPT’s point on withholding is “probably the best and most widely applicable answer” but lacks some important caveats.
“This does not address 1099/independent contractors who have no taxes withheld and may have to pay estimated taxes,” Nott said.
Overall, Nott described ChatGPT’s responses as “70% or 80% accurate.”
What do financial advisors think about ChatGPT?
With that in mind, Nott said he’s not worried about losing his job to an AI like ChatGPT.
Balanced financial advisors need to gather information about their clients’ “needs, values, goals and key relationships,” he said.
“It’s a very therapist-style question. There’s a vulnerability — that’s where you get real, real answers to things — that you have to bring out through the first conversation,” he said.
Nott isn’t sure humans will trust AI enough to show its vulnerability.
“In my view, unless humans are sufficiently comfortable with AI, what we actually do as wealth advisors will not work,” he said.
What do AI engineers think of AI financial advisors?
Matthew Alhonte is a machine learning engineer at healthcare technology company Actium Health, where he has worked on designing AI models. In his written interview, he said trust might not actually be an issue for his hypothetical AI financial advisor.
“Studies show that people often want to be more loyal to machines than they are to people,” says Alhonte.
A 2014 study by researchers at the Institute for Creative Technologies and Bard College backs up that claim. Patients interviewed for a health checkup reported “decreased fear of self-disclosure” when the interviewer was told it was an automated program.
Alhonte says that LLMs can be trained on human-curated data to ask sensitive financial planning questions such as, “Do you have any disabled dependents who need to retire with your savings?” I pointed out that you can.
He also disagreed with pop culture perceptions that AI looks like a robot. He said his LLMs, such as ChatGPT, are “actually pretty good at emulating the tone and writing style” of humans, and AI Financial could help his advisors build trust with their clients. I said yes.
However, Alhonte warns that LLM is “extremely unreliable.”
He states that these systems are “good most of the time, but 1 in 100 they go catastrophically wrong” and that “when it’s important to be catastrophically wrong, maybe It will not be accepted,” he said.
What do you think of ChatGPT?
“Sophisticated AI technologies may play a role in the financial advisory industry in the future, but AI is unlikely to fully replace human financial advisors in the near future,” said ChatGPT.
However, given the level of activity in the AI industry, that “advanced AI technology” may not be far away.
ChatGPT was just released a few months ago. In an interview with StrictlyVC, OpenAI CEO Sam Altman neither confirmed nor denied that OpenAI may release his GPT-4 (the successor to his GPT-3.5 LLM that powers ChatGPT) this year. did not. Google is also testing an LLM-based ChatGPT competitor of his called Bard. Next month, developers will be able to integrate Bard into their products, and they plan to roll it out to the general public “within the next few weeks.”
For now, ChatGPT seems to agree with Nott that some aspects of a financial advisor’s job need to be humanized.
Financial advisors need “emotional intelligence, empathy, trust and the ability to build rapport,” he said, qualities that “cannot be easily replicated by AI.”
