Generative AI Now Being Used for Financial Advice


Generative AI has emerged as a useful tool for financial advice, offering consumers a free way to receive customized guidance on everything from creating a budget to managing an investment portfolio.

AI financial advice data and statistics

Despite a strong economy, many Americans are struggling to achieve their financial goals as 2023 comes to a close.

Nearly half of Americans are struggling to be financially secure, according to a Bankrate survey. Still, many of the Americans surveyed are optimistic about their financial future — 46% of Americans who don’t feel financially secure believe that they will someday.

About 2 in 5 Americans (41%) surveyed blamed insufficient retirement funds as the primary factor fueling their feelings of financial insecurity. Building an emergency savings fund is another common aspiration, yet 60% of Americans feel they’re behind on meeting this goal, too.

More people are now turning to AI platforms, like ChatGPT, as a cost-effective way to manage their finances. The public debut of ChatGPT in November 2022 has boosted consumer awareness of AI’s potential: The chatbot currently has over 100 million users and the website generated 1.6 billion visits since June 2023.

Americans and their financial goals

For many Americans, their financial landscape feels like a battlefield — an on-going struggle to save for major life events while combating rising prices.

While inflation is down significantly from the summer of 2021, interest rates remain at their highest level in more than 15 years. From buying a car to purchasing a home to paying down credit card debt, consumers are feeling the impact of broader economic factors on their bottom line.

Americans feel behind in achieving their financial goals due to a variety of factors:

—57% of Americans who have not increased their emergency savings since the beginning of 2023 blame rising prices and inflation.

—56% of Americans who are employed believe they’re behind on retirement savings, according to a September Bankrate poll.

—73% of aspiring homeowners cite affordability as their primary obstacle keeping them from owning a home, according to a Bankrate report.

For Americans struggling to get ahead, AI offers a way to obtain personalized advice and financial information at home for free.

“AI can be a useful tool to understand how to organize basic finances like budgeting, saving, and paying down debt,” says Stephanie Genkin, a certified financial planner and founder of My Financial Planner, LLC in Brooklyn, New York. “While not always 100% reliable, it’s a great place to start to gain financial literacy.”

AI financial tools

In the not-so-distant past, managing money often meant sitting down with a financial adviser or conducting your own in-depth research. Information wasn’t always readily available — or free.

Flash forward to today, when the financial industry is experiencing a digital revolution. Consumers now have access to easy online banking, handy budgeting apps and even robo-advisers that use complex algorithms to help with investing.

While these advancements make money management more convenient and accessible, the advice they offer — if any — is often generic.

That lack of personalized guidance is changing with artificial intelligence, specifically AI chatbots. These digital assistants offer the potential to fill the gap between individuals struggling with financial goals and the guidance they need to achieve those goals.

Platforms like ChatGPT offer more than just casual conversations with a robot. They provide access to financial planning information and insights once only available for a fee from an adviser.

One big advantage of AI is its ability to analyze vast data sets quickly. AI can review your income, expenses, savings, investments and financial goals, offering advice tailored to your unique situation. Users can also get guidance on creating a budget or understanding insurance products.

Other AI-driven financial tools include:

—Automated budgeting and expense tracking

—AI-driven investment platforms for smart investing

—Personalized financial planning tailored to your goals

—Debt management strategies

—Improving financial literacy

Consumers are also getting more comfortable with the idea of AI-integration in financial planning. In fact, nearly 1 and 3 investors would be comfortable using generative artificial intelligence to receive financial advice, according to a report by CNBC.

However, it’s crucial to note that while generative AI can be a valuable tool, it can’t replace human judgement. Sure, AI can analyze large amounts of data, but it’s not going to provide you with specific investment recommendations. Certain aspects of your financial life still require a more nuanced approach.

Also, OpenAI, the company that developed ChatGPT, warns that the chatbot “sometimes writes plausible-sounding but incorrect or nonsensical answers.”

For consumers, AI can enhance financial decision-making but it can’t replace it. Experts recommend finding a reliable source to vet information provided by a chatbot.

“I wouldn’t make any big financial decisions without also speaking to a fiduciary,” says Genkin.

Keep in mind:While AI chatbots are efficient tools for time-saving activities, some of the content generated can be unreliable or outdated.

How AI can be used in financial advising

Consumers aren’t the only ones using AI to manage money.

For years, financial firms have utilized the technology for everything from fraud detection to credit scoring. As generative AI evolves, more financial advisers are finding new ways to incorporate the technology into their workflows to streamline everyday tasks such as research, stock market analysis and report generation.

Jeremey Finger, a certified financial planner and founder of Riverbend Wealth Management in Myrtle Beach, South Carolina, says he thinks chatbots can be an efficient tool for advisers by helping them simplify tasks like drafting emails to clients.

“I think the danger, especially for clients, lies in assuming the information it provides is true,” says Finger. “It also can’t ask a client thoughtful follow-up questions. It only works off the information you put in.”

For example, if someone with a disability or terminal illness fails to input those details into a chatbot, the advice they receive won’t be tailored to their needs.

“To assume AI is taking those things into consideration is poor judgement,” says Finger.

How to choose the right financial adviser

Robo-adviser: A type of automated financial adviser that provides algorithm-driven portfolio management and investing services with little to no human intervention.

Financial adviser: A professional who is paid to offer financial advice to clients. They typically offer guidance on retirement, personal finances and investments.

Rather than turning to AI chatbots, there are other options available if you need personalized financial guidance, including traditional advisers and robo-advisers.

The rise of AI has seen a parallel surge in the popularity of robo-advisers. While not a new concept, robo-advisers have become more sophisticated with the integration of AI, offering users a cheaper and more convenient way to invest.

But creating a comprehensive financial plan involves more than a data-driven investment strategy. Selecting the right financial adviser, whether human or AI-driven, is an important step in achieving financial goals.

Not everyone needs to work with a human adviser, but doing so provides valuable insight and context you might not get with generative AI or even a robo-adviser. Estate planning, which involves drafting legally-binding documents to pass along your assets after you die, is one example of a complex situation that warrants speaking to a human adviser.

But how do you select the right financial adviser? Here are a few tips:

—Look for a fiduciary: A fee-only fiduciary is a professional that’s ethically bound to work in your best interest — not the interests of insurance companies or financial institutions. They’ll provide unbiased, personalized advice that you can trust.

—Check their designations: Certain designations carry more weight in the financial planning industry than others. A certified financial planner, for example, must complete at least three years of experience, pass a rigorous exam and maintain on-going education.

—Understand their fee structure: advisers can get compensated in several ways. Make sure you understand how an adviser is paid and that the price fits your budget.

—Ask questions: Interview several advisers before making your decision. When you meet with potential advisers, ask about their experience and inquire about specific cases they’ve handled. Pay attention to their communication style and transparency.

If you need expert guidance when it comes to managing your money or planning for retirement, Bankrate can help you get matched with a financial adviser in minutes.

Frequently Asked Questions

—What is a financial adviser?

A financial adviser provides guidance to help clients manage their money and plan for their financial future. They help track, manage and balance investments as well as offer advice on topics like retirement planning, insurance, buying a home and budgeting.

—What is generative AI?

Generative AI is a branch of artificial intelligence that involves machines creating content — such as text, images or videos — based on patterns and information learned from massive datasets.Generative models, like ChatGPT, produce human-like responses and can assist in a range of tasks, including financial planning.

—How do I achieve financial goals?

While the process of achieving financial goals looks a little different for everyone, there are three general steps to follow: Clearly define your goal, identify your time frame and monitor your progress.You can set yourself up for success by making your goals specific, measurable and achievable. For example “I want to make more money” isn’t a specific goal, but “I want to increase my salary 30% over the next three years” is.

Once you’ve defined your goal, don’t just set it and forget it. Designate specific times to check your accounts and make adjustments as needed. It’s generally recommended to review your progress at least once a month for short-term goals and once or twice a year for long-term goals.

(Visit Bankrate online at bankrate.com.)

©2023 Bankrate.com. Distributed by Tribune Content Agency, LLC.



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