Could ChatGPT and AI replace traditional financial advisers?
Artificial intelligence is on the march but financial advisers need not worry about being replaced in the forseeable future, experts say. Here’s why.
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Aritificial intelligence (AI) is on the march, thanks in part to the success of ChatGPT - but financial advisers need not be too worried about being replaced in the forseeable future, experts say.
Since US company OpenAI launched ChatGPT in January the chatbot has become the fastest growing consumer application in history.
There’s been plenty of talk about just which professions ChatGPT - and AI generally - could potentially replace, among them financial advisers.
But it seems they are more likely to complement the work of these professionals.
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The financial advice industry in Australia is facing a shortage, with rising costs and new professional standards following the Hayne Royal Commission.
Many have simply called it quits.
There are now only around 16,000 advisers in Australia, with costs of financial advice also reportedly rising.
So some are asking if AI could fill the void, with the likes of ChatGPT being the future of financial advice?
Stockspot not yet convinced on AI
Stockspot has been at the forefront of AI in the financial services sector in Australia, being the first and largest robo-adviser (online investment adviser).
Based on an online questionnaire, Stockspot has built software and algorithms that determine risk profile and goals.
The platform recommends an investment strategy based on ETFs then automatically monitors and rebalances the portfolio for clients.
Stockspot founder and CEO Chris Brycki told Stockhead that ChatGPT will have an interesting future but he doesnt expect the AI tool to replace human financial planners any time soon.
“In terms of competition, I think it will compete against Reddit and other places where people would seek general financial answers,” he said.
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“It is able to find a lot of information and collate that information very efficiently – when it is correct.”
He said for example, it can provide simple explanations to questions such as “What is an ETF?” or “What is financial planning?”
“For some professionals, like advice practitioners, it may make their jobs and daily tasks a lot more efficient,” Brycki said.
“It could actually assist them with routine work like producing statements of advice, which would then free up their time to spend with their clients.”
However, he said ChatGPT could not, at this stage, take complex personal circumstances into account.
“Say you wanted tax planning, estate planning and ETF investment advice, the responses it generates are likely to be shallow and lacking in depth and insight,” he said.
Brycki said another limitation was that its knowledge is not always up to date.
He said for example, when ChatGPT was asked about the outlook for bond ETFs in Australia, its knowledge was limited to 2021 and it said: “My knowledge cut off is 2021, so I cannot provide up-to-date information on the current market.”
“Much to the dismay of every trader, ChatGPT also doesn’t have any predictive ability so, it won’t be able to tell you which investments will outperform and that long-desired Alpha will remain elusive,” Brycki said.
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Humans needed to manage behaviour
Deakin University behavioural finance academic and Morningstar analyst Erica Hall said investors already could obtain a vast amount information online, and ChatGPT could potentially provide even more granular information.
However, Hall said the value add advisers provide was in managing human behaviours.
“Advisers coach investors through their emotions to stay the course,” she said.
“When markets get choppy and the temptation is to throw in the towel the adviser can act as a circuit breaker and be the voice of reason, while ChatGPT can’t do that.
“Advisers can consider the specifics of a person’s situation, and also by asking the right questions identify issues that the investor may not have even thought about, whereas ChatGPT is only as good as the questions you ask it.”
Hall said that while ChatGPT was an exciting development that may be able to enhance the advice process, it did fall short when it cames to managing human behaviours - and that’s a key element of good financial advice.
“Ultimately I can see there is a role for both and AI (like ChatGPT) can make the advice process more efficient and hopefully cheaper, but also the human element of advice in offering behavioural coaching is very important,” she said.
“There is no point in having a great financial plan if it isn’t properly implemented and that’s where the adviser makes all the difference.”
Financial Planning Association of Australia CEO Sarah Abood told Stockhead that ChatGPT probably had the potential over time to do a lot of tasks, particularly the more routine administration and paperwork of financial planners.
“However that’s realistically several years away and the more sophisticated judgement and ethical decision making further still,” she said.
“The other issue is consumers’ readiness to accept advice in that way.”
How does ChatGPT see its role?
We asked ChatGPT where its sees its role in providing financial advice, specifically posing the question: ‘Will ChatGPT replace financial advisers?’. It replied that financial advisers still had a role to play in providing personalised advice.
This content first appeared on stockhead.com.au
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
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Originally published as Could ChatGPT and AI replace traditional financial advisers?
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