AI advisers: Should you ask ChatGPT for investment advice?

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Regardless of whether you’re an AI fan or sceptic, ChatGPT and its ilk are starting to shift the paradigm when it comes to how we find information. Digging up details from multiple different sources, be they websites, books or real-life people, has become secondary to just asking AI about it.

In some regards, that’s great. Who wants to spend 15 minutes searching for an obscure piece of info you’ve half remembered when you can just ask AI and be 70 per cent sure it’s correct? In other regards, it’s not great (see: medical advice, therapy).

What’s the problem?

A recent survey of US adults showed that of those who use generative AI, two-thirds report using it for financial advice, and 80 per cent of people who acted on that advice said it improved their financial situation.

However, it’s not all positive. A separate survey revealed 20 per cent of people who followed advice from AI reported losing more than $100, a percentage that increases to almost 30 per cent for Gen Z investors.

What you can do about it

So if you’re currently using AI for financial advice, should you stop? Or is it really the future?

• What AI is good for: If you’re sitting down to ask ChatGPT for financial advice, it’s best to have some clear parameters in mind about what you should and shouldn’t be asking it. For Chris Leahy, business advisory partner at William Buck, AI is well-suited for providing general, low-stakes information. “Explaining how compound interest works, creating a budget template or comparing the pros and cons of paying off a credit card sooner are all low-risk queries. They give you a starting point,” he says. Generally, using AI to improve your financial literacy is fine, as the models have been trained on reams and reams of the sort of excellent advice you’d find in our Money section, which by and large is general in nature. Using it for small, simple requests involving specific scenarios in your life is likely also fine, for example, asking it to make cheap meal plans. However, Glen Hare, co-founder and financial adviser at Fox & Hare, raises an important point about using AI in this manner: what you get out is only as good as what you put in. “The challenge we’ve seen with AI is it requires a degree of financial literacy to enable the user to ask the machine the right questions to get the correct and/or appropriate output,” he says.

• What AI is not good for: I feel like this shouldn’t need saying, but just in case: don’t ask AI what to invest in, how to make additional super contributions, or for tax advice. Everyday AI models such as ChatGPT are in no way suited to give specific, complex information about your financial affairs. To make matters worse, most current models are pretty sycophantic – they will try to come up with an answer just to please you, even if it’s wrong, which could lead to you making disastrous investment decisions. “Limitations arise when customising the information to a personal situation,” says Lindzi Caputo, partner at HLB Mann Judd Sydney. “Strategies involving tax, superannuation, insurance, social security benefits and estate planning are complex and require the expertise of an experienced adviser. AI tools may not capture the nuances of applying information to the personal situation as a licensed financial adviser would.” Basically, if it’s something you wouldn’t ask your friend at the pub, don’t ask AI about it.

• What about robo-advisers? Robo-advice is an emerging use of AI which employs AI models specifically trained to give financial advice. They are licensed products with set rules and disclosure obligations, and are starting to be offered by super funds as a way to provide basic financial advice to members. They’re not quite the same as ChatGPT, and are much more limited in what they’ll tell you, and usually a human adviser will step in once your scenario starts to get complex. “The difference with those sorts of engines is that there’s someone who stands behind it. There’ll be an Australian financial services license holder that’s accountable for the answers that you get,” says Sarah Abood, chief executive of the Financial Advice Association. “But in the future, I certainly see it becoming much more a hybrid model where you’ve got digital tools and human advisers both interacting to deliver a great service to consumers.”

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.