AI: When your financial adviser is a chatbot

More people are turning to AI chatbots for tax help, investment advice,
and even retirement planning, said Kailyn Rhone in The New York Times. Nearly one-third of people who have used artificial intelligence for financial advice have asked about retirement, according to a survey from Intuit Credit Karma. The draw is understandable. Artificial intelligence tools “are easy to access, respond instantly, and often don’t charge fees.” Users can also ask a chatbot “questions they may be embarrassed to ask a human adviser.” Caitlyn Yingling, a recruiter in Dallas, looked at her 401(k) for the first time ever last September and realized her investments were in a target-date fund for someone who would have retired in 2015. She turned to ChatGPT, which “urged her to reallocate her investments using a more aggressive strategy”—appropriate advice for someone in her early 30s. She also reviewed those changes with a human financial adviser.

I wouldn’t completely trust a bot with my money, said Peter Coy in The Wall Street Journal. “They’re sociopaths—smooth, persuasive, and devoid of empathy.” One day, maybe, AI could become “a true fiduciary.” But it would need not only to understand laws, regulations, and court cases; it must also acquire the “digital equivalents of empathy, humility, and a sense of fairness.” For now, bots have biases, make mistakes, and “don’t have the training to act in users’ best interest.” You’d think credit investing would be “a natural area for large language models to be deployed,” said Sujeet Indap in the Financial Times. “Investing in loans and bonds requires as much number crunching as the review of legal contracts and knowledge of the law.” But investors on Wall Street remain hesitant to turn it all over to machines. There is still value to “human service” and the ability to “pick up the phone and bounce trading ideas off a human expert.” In some ways, AI has shown Wall Street that the “real-life, relationship-based part of the job has never been more crucial.”

That’s not to say ChatGPT can’t have some good ideas for your portfolio, said Lucy Lazarony in Investopedia, and it might even be a helpful resource for retirement planning. But if you are going to get advice from a bot, do so cautiously. ChatGPT and Google’s Gemini are best at answering factual questions about general concepts, such as deciding when to collect Social Security benefits, “estimating medical costs, and choosing which retirement accounts to tap first to minimize taxes.” Always review the sources cited by the chatbot to ensure the information it provides isn’t outdated, and be careful about what private data you give the AI. “The information you enter is often used as training data and could be subject to hacking and data breaches.”