A Closer Look at the Capabilities of AI in Financial Planning

A recent experiment pitted ChatGPT, a popular AI chatbot, against human experts in the field of personal finance. The results were mixed, with the AI providing some useful general information, but ultimately falling short in providing detailed and accurate advice.

The test involved asking ChatGPT a series of questions on topics such as pensions, mortgages, funding university, and insurance. While the AI was able to provide some basic information and general guidance, it often lacked the level of detail and nuance required to make serious financial decisions.

In the case of pensions, ChatGPT provided a rough estimate of the amount needed for a comfortable retirement, but failed to take into account several key factors, including the impact of inflation and the potential for additional employer contributions. The AI’s advice on mortgages was also criticized for being too generic, failing to consider the complexities of different types of insurance and the importance of shopping around for the best deals.

When it came to funding university, ChatGPT provided some useful information on government loans and tax-free savings options, but failed to mention the importance of considering the child’s own financial situation and the potential risks of investing in a short-term window. The AI also failed to provide guidance on how to balance the need to save for university with other financial priorities, such as paying off high-interest debt or building an emergency fund.

The AI’s advice on insurance was also criticized for being too simplistic, failing to take into account the complexities of different types of policies and the importance of considering individual circumstances. For example, ChatGPT failed to mention the importance of considering the impact of inflation on insurance premiums, or the potential benefits of bundling policies to reduce costs.

Experts say that the limitations of AI in personal finance are due to its lack of human intuition and experience. “AI can process vast amounts of data, but it lacks the nuance and empathy that human experts bring to the table,” said one expert. “When it comes to making serious financial decisions, there is no substitute for human expertise and judgment.”

The experiment also highlighted the importance of providing AI with sufficient information to provide accurate and relevant advice. “If you want to get better detail in an answer, you need to provide a lot of information, such as your age, salary, and debts,” said another expert. “ChatGPT can only provide general guidance if it doesn’t have enough information to work with.”

Overall, the experiment highlighted the limitations of AI in providing detailed and accurate financial advice. While ChatGPT may be useful as a starting point for research or as a tool for generating broad strategies, it is not a substitute for human expertise and should not be relied upon for making serious financial decisions.

As one expert noted, “ChatGPT may be a useful introduction and guide, but if you want advice, you should be better off with a human.”