ChatGPT boasts the versatility to craft a wide array of content, including blog posts, cover letters, social media updates, and even developer code. However, its proficiency in giving financial advice might be in question.
What’s interesting is that according to the recent survey, 47% of the participants affirmed their utilization of ChatGPT for financial advice.
While the AI is capable of retelling generalized financial principles, you should be aware of using it before taking personal financial advice.
Here are 7 reasons why using ChatGPT for financial advice is a bad idea.
1. ChatGPT is not a licensed advisor
Just as you thoroughly research and scrutinize when selecting a human financial advisor, a similar approach is wise when considering advice from an AI.
ChatGPT operates as a language model, and although passed the bar exam, it lacks the authoritative qualifications of a certified financial advisor and lacks specialized training in financial data analysis.
While the AI is capable of furnishing fundamental financial guidelines, it falls short in comparison to human expertise when it comes to giving financial advice.
An essential factor to acknowledge is that financial decisions are very specialized, necessitating individual insights tailored to unique circumstances—an aspect that AI might struggle to comprehend fully. Furthermore, the dynamic nature of financial markets demands real-time adaptation and a nuanced understanding, something that an AI’s knowledge repository might find challenging to keep up with.
2. ChatGPT makes stuff up
ChatGPT and other artificial intelligence occasionally experience instances of “hallucination,” which means that it is fabricating statements that appear accurate but lack authenticity. This phenomenon is widely acknowledged within the realm of multiple AI systems, posing an obstacle for engineers and professionals engaged in the field of artificial intelligence.
Although considerable advancements are anticipated in the years ahead as researchers tackle this issue, it remains imperative for individuals to exercise vigilance and verify the accuracy of the personal finance guidance provided by AI.
Given the tendency for AI-generated content to occasionally stray from accuracy, it is crucial for users to adopt a proactive approach to fact-checking the financial advice they receive. Relying solely on AI-generated suggestions without corroborating them through reliable sources can lead to potential missteps in financial decision-making.
While the potential of AI to enhance and speed up various aspects of our lives is undeniable, its limitations and imperfections must be acknowledged. Until AI systems consistently demonstrate an impeccable track record in providing precise and reliable information, the responsibility of cross-referencing and validating financial advice remains with the individuals seeking guidance.
3. ChatGPT doesn’t know anything about risk tolerance
Even in the scenario where ChatGPT excels in coming up with an exceptional asset allocation strategy for your portfolio that outperforms all others, there is no assurance that it would ensure your peace of mind.
When consulting financial advisors, human advisors commonly inquire about your risk tolerance and your willingness to withstand varying levels of risk in pursuit of financial gains.
Given that every individual’s risk tolerance exhibits uniqueness, this aspect holds paramount importance when making investment choices— a sphere that current artificial intelligence capabilities are incapable of addressing.
The intricacies of risk tolerance encompass a complex interchange of personal factors, including financial goals, time horizon, and psychological comfort with market fluctuations. Human advisors leverage their expertise to delve into these nuances, tailoring recommendations to align with an investor’s specific risk appetite.
4. ChatGPT is not up to date
ChatGPT’s information is only updated until September 2021. This implies that any events, updates, or developments that have occurred after that date might not be within its realm of understanding.
So, if you’re curious about recent inflation figures that reflect the changing costs of goods and services, you would be better served by consulting sources that have real-time data on these economic indicators.
Similarly, for information about the stock market’s recovery in 2023, it’s advisable to refer to financial news outlets or market analysis reports. The current status of the housing market, whether it’s a buyer’s or seller’s market, can be found through real estate market reports and expert opinions.
Lastly, indicators and predictions about a potential recession would require staying updated with the latest economic forecasts from trusted financial institutions and economists.
5. ChatGPT has no investment track record
Every investment document will remind you that previous outcomes are not indicative of future results. However, examining an advisor’s historical achievements for evidence of their competence can offer reassurance and valuable insights.
While ChatGPT doesn’t function as a financial expert, you can’t evaluate its suggestions based on this data to forecast its future performance or potential outcomes. Just as with investments, relying solely on past data might not accurately predict future recommendations from ChatGPT.
It’s important to approach each situation with an open mind, considering a range of factors beyond historical information to make informed decisions. Keep in mind that ChatGPT’s responses are based on patterns it has learned and might not guarantee specific future outcomes.
6. ChatGPT doesn’t understand your unique situation
In the world of finance, a widely recognized phrase is that individual finances are unique to each person. While a chatbot with access to the entire expanse of the internet possesses an extensive wealth of information, it isn’t tailored to provide personalized insights concerning your specific financial circumstances.
A human financial advisor takes into account numerous critical elements, such as your proximity to retirement, earnings, financial responsibilities, debts, familial commitments, and additional intricate factors.
In contrast, ChatGPT isn’t engineered to furnish dependable guidance with such a high level of subtlety. The intricacies of personal financial situations require a human touch that considers the many-sided nature of each individual’s economic landscape.
While ChatGPT can offer general insights and information, it’s crucial to recognize its limitations in offering advice that matches the intricacies of your personal financial scenario.
Human advisors possess the ability to integrate a wide array of details, emotions, and life circumstances, ultimately crafting a more comprehensive and customized financial strategy based on your unique needs and aspirations.
7. ChatGPT offers only generic advice
Should you seek fundamental guidelines or commonly favored investment options, ChatGPT can furnish informative insights. It suggests strategies like spreading your investments across various assets, considering the duration you intend to invest for, and creating a financial safety net for unexpected situations.
However, its capacity to provide exceedingly tailored advice is limited. Even when probed for detailed recommendations, such as specific stock suggestions, ChatGPT will merely present widely recognized options. It refrains from endorsing one stock over another due to its lack of personalized context and expertise in real-time market dynamics.
While ChatGPT’s input is valuable for grasping broad investment principles and prevalent choices, it’s essential to understand its constraints when it comes to tailored guidance. For comprehensive and personalized investment strategies, involving a human financial advisor is prudent.
These experts can integrate your distinctive financial objectives, risk tolerance, and evolving circumstances to shape a strategy that aligns closely with your aspirations and the ever-changing landscape of the financial market.
