ChatGPT is everywhere at the moment.

The AI-powered chatbot is helping people create recipes, write essays, come up with ideas for birthday parties…

…and even create poems about financial planning (judge for yourself whether it’s any good):

Launched last November by Microsoft-backed OpenAI, ChatGPT stormed to 100 million monthly active users after just two months (you now have to join a waiting list to try it).

Obviously, its uses go way past dodgy limericks. The way it works is to scour internet sources, from blog articles like this one, to books, webtexts and of course Wikipedia, to provide information via human-like conversations. This has led many to predict a huge shake up and “an existential threat” to services such as Google.

What does ChatGPT mean for financial advice?

As with virtually every topic, the internet is port of call for many people when they want to find out about finances. So what does ChatGPT have to say about a relatively simple financial question?

It’s a pretty good answer.

It gives the reader some sort of understanding about the basics and sets out some advantages for the two options. It’s also careful not to give out recommendations, the next step being speaking to a professional.

A real advantage to something like ChatGPT (more AI bots are coming onto the market, including Google’s own service, called Bard) is collating content from multiple sources and presenting them in an easy-to-read format, simplifying some of the subject’s complexities in the process. It’s a useful start-off it you’re doing research, saving you the need to trawl through multiple websites, brochures or textbooks.

But there are limitations.

The first is falling for groupthink. While the internet is supposed to be a global town square, freeing up people’s opinions, it’s become very polarised. In scraping opinions and articles from the web using AI, there’s a danger you’ll just get multiple versions of one viewpoint. Giving you one answer, with no originality.

Secondly, there’s the issue of impartiality. How much can you trust the information you’re being fed? When using a search engine such as Google, we’re all used to navigating suggestions from companies that have paid a premium to get their site in the top spot. When the message is delivered by a friendly-sounding bot instead, will it be as transparent what information was gathered organically and which was driven by its sponsors?

The wider uses of AI

Chatbots aren’t the only areas of finances where artificial intelligence has been predicted to make waves.

Algorithm-based trading sees computers take over buying and selling stocks and bonds, speeding up the process and relying on rules rather than instinct.

But while sometimes used successfully, they have also come into problems. The ‘flash crash’ in 2010 saw shares on US stock markets plummet, only to rebound 30 minutes later, but not before wiping around US$1 trillion off the market value in the process. The crash was blamed on automated and high-frequency trading leading to large volumes of shares being sold off in a short space of time.

The ‘robo advice’ market is another area. Robos are automated digital platforms that provide investment advice or management services. The market is estimated to have around US$4 trillion assets under management worldwide.

The lack of human involvement keeps costs down but it’s really only suitable for the most basic transactions. Money, and the advice surrounding what to do with it, is more than just a transaction. Financial decisions involve emotions, aspirations and concepts.

The key is empathy. Planning your finances can mean talking about difficult subjects. If someone has questions about inheritance tax, it might also come at a time when they’re coming to terms with a death in the family. Making adjustments to your investment horizons might be due to a change in circumstances like serious illness or redundancy. It’s never just moving figures about on a spreadsheet.

Sometimes it’s best to hear it from a human

We’re already well-accustomed to chatbots – whether it’s through your bank, insurance company or shopping site.

So are they friend or foe when it comes to financial advice?

On the plus side, greater use of AI like ChatGPT has benefits, especially on the technical side, such as crunching the numbers, or doing some of the heavy lifting which advisers like me might usually outsource, or delegate to experienced paraplanners.

But when the mathematical outputs have been produced, there’s always going to be that element of interpretation needed to answer the question: “What does this mean for me?”

And for that, I believe it’s still best to hear from a human.

AI can take you only part of the way to imagine life in retirement, but financial advice needs to look beyond the numbers. It needs to take in a person’s history, relationship to money, hopes, dreams and fears. It needs to be able to read between the lines and not take an answer to a question necessarily at face value. It needs to be aware of subtleties such as tone of voice – this might indicate that what’s being said, isn’t necessarily meant, for example.

The advice you get from us is always impartial but never lacking empathy, and that’s the kind of support I believe isn’t (yet!) easily replaceable by a machine.

But what do you think?!