Can Chat GPT replace an advisor?

Can Chat GPT replace an advisor?


About 50% of Gen Z and just over half of millennials have used OpenAI’s ChatGPT chatbot for investment advice, according to a survey of 2,000 Americans by the financial and investment advisory firm The Motley Fool.

This comes despite OpenAI warning ChatGPT users that the app sometimes writes rational-sounding answers that are incorrect or meaningless, and that the tool is not intended to provide advice.

Why is ChatGPT not trusted for investment advice?

Well, there’s no way that ChatGPT will provide you with a way to beat the stock market (get a return on investment that outperforms a broad-based index like the S&P 500).

Despite how advanced it is, this Chatbot will still be unable to create a diversified virtual portfolio, consisting of stocks and fixed income.

One important thing to know is that an investment advisor needs to be licensed, approved by the regulator  and have spent many years of work and experience, in addition to tracking records of good performance to be able to give advice.

Besides, there is an important fiduciary duty that the advisor has toward his clients, on top of that market data changes instantly and this is not possible to track or to act on by Chatgpt.

Another reason is that the AI tool itself warns you that it cannot provide you with the advice you want, and it clearly responds by saying “As an AI language model, I don’t have access to real-time financial data or market analysis.

Thus, it is not an up-to-date reference by which an investor can be aided to trade or invest. The free version of ChatGPT has limited knowledge of world events after 2021 which means that its responses are not based on real time data. Afterall, a successful investor is one who has minute to minute updates from the market and not at all, delayed data that will definitely affect their investing.
While this technology may be able to perform lucky operations in terms of stock picking, it is not long before we are sure whether it can replicate these results in the long term.

Most importantly, there’s a difference between potential and reality, and we are not in a place where we should rely on artificial intelligence or ChatGPT to make investment decisions for ourselves.

What are the limitations of ChatGPT?

The developers of ChatGPT provide numerous disclaimers about the AI’s performance, indicating that users should approach its advice cautiously. Considering these disclaimers, it is advisable to take the AI’s guidance with a degree of skepticism. When inquiring about its limitations, ChatGPT itself provides the following information:

  • Lack of common sense
  • Sensitivity to input phrasing
  • Tendency to produce verbose responses
  • Difficulty in handling ambiguous phrases
  • Propensity to amplify biases
  • Inability to engage in multi-turn conversations
  • Limited access to up-do-date information
  • Proneness to generating incorrect or misleading information

Merely considering these factors should make anyone reconsider depending on ChatGPT for crucial financial information. If your financial advisor admitted to having a deficiency in common sense, restricted access to current information, and a tendency to produce inaccurate or deceptive information, it is highly unlikely that you would choose to employ their services. It is important to bear this in mind if you intend to rely on ChatGPT.

Bottom Line

ChatGPT has taken the world by storm. Artificial intelligence (AI) seems to have the answer for anything that anyone throws at it, from how to prepare breakfast to how to fix a car. But when it comes to financial advice, ChatGPT is definitely not the one to ask.

The technology can be useful for educating yourself, when searching for definitions of financial terms that you may not be familiar with, or for collecting data when researching a company to invest in.

But don’t expect AI to completely replace human financial advisors anytime soon.

A human financial advisor is best suited to help you with financial decisions that involve feelings and behaviors such as choosing a place to retire.

If you have interest in investments and you’re seeking investment advice, the Wealthface team of experts is always ready to provide you with the best advice.

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