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How ChatGPT could change financial advisory services

There are many ways the groundbreaking conversational AI agent, ChatGPT, could transform financial advisory services. In this article, we explore how ChatGPT and similar technologies can increase advisor productivity by automating routine administrative tasks, as well as help compliance teams by providing clear explanations of advice and recommendations.

Responsive AI
February 15, 2023

ChatGPT is a groundbreaking technology whose potential applications in the financial services and advisory industry are game-changing – and only beginning to be realized. This AI-driven conversational agent that appeared only a few months ago has become the gateway for many people to experience first hand the potential power of this technology.

Ask any question and ChatGPT will attempt to answer it, including providing any advice it is asked for. But it can do more than that — it can be used by wealth managers and advice providers to automate complex tasks, create personalized client experiences, and save time otherwise spent on mundane administrative tasks. It can even map out a marketing and branding strategy for your firm. 

In this article, we'll discuss how ChatGPT and related AI technologies such as Google’s Bard and others could revolutionize the delivery of financial advisory services, from automating routine enquiries to providing actionable insights for compliance teams. 

What is ChatGPT?

ChatGPT is an advanced large language model (LLM) developed by OpenAI that uses natural language processing (NLP) to understand and generate human-like text. ChatGPT makes AI more accessible to users by allowing them to interact with the model using natural language, rather than programming languages or specialized software. This makes it easier for individuals with limited technical expertise to access the benefits of AI technology, such as improved efficiency and personalized recommendations. Additionally, the ability of ChatGPT to understand and respond to text in real-time allows for seamless and intuitive human-AI interactions.

How ChatGPT Could Change Advice

Here are some of the ways ChatGPT and generative AI could impact financial advisors and their firms:

1. Personalized recommendations:

ChatGPT can formulate customized advice based on a user's specific financial situation and goals. You can understand this yourself by experimenting with the prompts you enter into ChatGPT. That’s what Josh Katzowitz, The White Coat Investor did. 

Katzowitz asked a series of realistic questions about financial planning and investing advice and received plausible answers. 

For example, Katzowitz asked ChatGPT: “I need some advice. Is it better to pay off my mortgage that I refinanced at 3.25% (before interest rates started skyrocketing) or invest it in the market? I’m worried that I’ll make less than 3% in 2023 if I put it in the stock market. What is the better investment decision?” The response from ChatGPT was predictable and balanced and took all of 10 seconds to generate: 

“The decision between paying off a mortgage and investing in the stock market depends on your personal financial situation, risk tolerance, and investment goals. In general, paying off debt can provide a guaranteed return on investment in the form of interest savings, while investing in the stock market offers the potential for higher returns but also carries more risk."

"If you have high-interest debt or limited emergency savings, it may be more beneficial to pay off your mortgage. However, if you have extra funds and a long-term investment horizon, investing in a diversified portfolio of stocks may provide higher returns over time. It's important to consult with a financial advisor to determine the best investment strategy for your specific needs and goals.”

Katzowitz concludes the advice he received from ChatGPT, in his words, “didn’t suck.” While that’s not exactly high praise, ChatGPT is far from a mature product, much less one trained on specific examples of good financial advice. It will get better, and better in time.

2. 24/7 Availability:

ChatGPT can be accessed at any time, providing financial advice and support outside of traditional business hours. The ability of ChatGPT to interact naturally with human language means those conversations can occur any time of day by way of text messaging. And it’s a small leap from text to voice messaging. And another small leap to clone your voice and have your synthetic voice interact with your clients in the manner to which they have become accustomed. And that could change everything.

3. Improved accessibility:

With the use of natural language processing, ChatGPT can make financial advice accessible to a wider audience, including those who may not have prior experience with finance. Once advisors and firms have digitally scaled their ability to deliver financial advice, new markets will open up serving whole new demographics – all by reducing the cost of financial advice and automating and intelligently augmenting the advice process.

4. Real-time data analysis:

ChatGPT can process vast amounts of financial data in real-time, providing up-to-date market insights and recommendations. Initial versions of ChatGPT had limitations on the data it was trained on which impacted its accuracy and currency. But you can be assured that ChatGPT and all the other LLMs being trained for financial advice use cases are improving in accuracy all the time precisely because this kind of generative AI can process new and current data in real-time. 

5. Increased transparency:

ChatGPT can provide a clear and transparent explanation of investment recommendations, helping users make informed financial decisions. Every consideration that went into formulating a piece of financial advice can be documented and summarized by ChatGPT. This kind of radical transparency builds trust and works hand-in-glove with requirements to demonstrate compliance with any standard whether it be suitability or fiduciary.

6. Automated administrative tasks:

ChatGPT can automate routine administrative tasks such as data entry, document and report generation, and appointment scheduling. It can also write correspondence for you! These efficiencies free up an advisor's time – their most valuable asset – by augmenting their capacity to administer their clients. 

ChatGPT has the potential to transform the financial advisory industry by making AI technology accessible and delivering personalized advice, 24/7 availability, improved accessibility, real-time data analysis, risk and compliance insights, and increased transparency. Its natural language processing and real-time data analysis capabilities make it a powerful tool for scaling the work of financial advisors and firms. As the technology continues to improve and evolve, ChatGPT has the potential to revolutionize the delivery of financial advisory services, improving efficiency and providing valuable insights to clients. Artificial intelligence, whether it’s in the form of ChatGPT or other technology implementations, is quickly becoming an essential tool for financial professionals looking to accelerate productivity and stay competitive in a rapidly changing industry.

Responsive AI