Why ChatGPT Is a Finance Tool, Not a Threat
Written by
John Csiszar
Edited by
Brendan McGinley
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ChatGPT, the most well-known artificial intelligence (AI) bot, has generated both fear and excitement in the financial world. On the one hand, ChatGPT’s AI capabilities allow it to compile information and make projections in a fraction of the time that a human being could. On the other, without adequate human inputs and analysis, ChatGPT is subject to the same “garbage-in, garbage-out” shortcoming that plagues all computer systems.
That same human user is why, for all its capabilities, AI’s pitfalls remain rooted in our use of it like any other software. Here’s a deeper look at why ChatGPT is a finance tool, not a threat.
It Enhances, Not Replaces
Historically speaking, the rise of any new technology tends to spark a combination of both rejection and wonder. ChatGPT is no different. But according to the Harvard Business Review, AI will act as a human assistant, not its replacement. H. James Wilson and Paul R. Daugherty said that the technological impact is primarily how much it can boost what we do, rather than replace us.
ChatGPT can take meticulous labor away from financial advisors, allowing them to focus instead on what they do best: integrating a client’s complete financial situation into a lifelong financial plan. Most advisors would rather work with clients to develop holistic plans than waste time searching for IRS actuarial tables or income limits for deductible IRA contributions. The AI tool can be leveraged for what it does best: performing calculations and compiling raw data.
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AI Is Great at Plain-Language Explanations
Even the best financial advisors can sometimes get too “jargony” for clients. After all, it takes years of education and real-world experience to become a good advisor, and that world is filled with complex terms and lingo. ChatGPT is great at taking complex concepts or terms and relaying them in an easy-to-understand manner, something that can go a long way towards helping advisors communicate with clients, especially ones creating a financial plan for novice investors.
Imagine, for example, that you’re drafting bullet points for a meeting in which you want to cover how the alpha and beta of your investment strategy increases the delta of its performance. Phrased that way, the most beginning investors would feel their eyes glazing over. But ChatGPT can summarize this concept in as complex or simple a way as you’d like. If you were making a presentation to a group of fifth-graders, for example, ChatGPT could give you this version:
- Beta is like how much your boat rocks when the ocean waves (the stock market) move. A boat with high beta bounces a lot more when the waves hit.
- Alpha is like how good the captain is at steering. A skilled captain (positive alpha) can still move the boat forward faster than other boats, even if the waves are the same.
- Delta is the change in where your boat ends up compared to others. The waves (beta) push you around, but the captain’s choices (alpha) decide if you actually pull ahead or fall behind.
Obviously, this version might be too simplistic for a client presentation. But it just shows the scale of how ChatGPT can tailor complex concepts to nearly any level of sophistication.
It Doesn’t Have All the Data
ChatGPT can crunch whatever numbers you give it, but only a human advisor can plug in all of the variables that such a calculation needs to be accurate. If you ask ChatGPT to make a simple projection about how long your money will last, for example, it will gladly oblige.
However, the AI bot simply doesn’t know if you plan to modify your withdrawal rate over time, how much inflation you should factor in, if you have a child on the way, or any of a million other data points that make each person’s financial situation unique. It can speculate and provide estimations, but only a human financial advisor knows exactly which data are important to input for each calculation.
It Can Be Wrong
Probably the biggest single reason why ChatGPT shouldn’t be seen as a threat to finance is that it can be wrong. Even OpenAI, the creator of ChatGPT, admits in bold print on its own website that “ChatGPT can be helpful — but it’s not always right.” Even worse, OpenAI says that ChatGPT can not only get hard facts wrong but fabricate sources or speak too resolutely on open-ended and nuanced matters.
That doesn’t sound like the type of technology that’s a threat to humans, who can use critical reasoning to verify reality.
The Bottom Line
ChatGPT can be of immense value to financial professionals, who work in a system comprised of numbers and rules. But just as computers didn’t wipe out scientists or mathematicians, AI is unlikely to eliminate the jobs of good advisors. In fact, those who learn how to use it properly might find themselves with an edge over their competitors.
Editor’s note: While AI tools can assist in categorizing expenses and setting savings targets, they cannot replace the expertise and guidance of financial advisors.
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