3 Financial Tips From ChatGPT That Certified Planners Hate
Written by
Cara Danielle Brown
Edited by
Chris Cluff
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Deciding to use artificial intelligence to obtain financial advice may sound like the tagline of a Steven Spielberg film with a disastrous final act; but, in fact, many individuals are doing exactly that.
Surprisingly, the advice isn’t all bad. It does, however, have limitations.
“My experience and concern with ChatGPT is the generalized nature of the advice it gives,” said Jeff Rose, certified financial planner and founder of Good Financial Cents. “While it can provide useful information, it lacks the personalized touch that’s crucial for effective financial planning.”
Here are the three financial tips from ChatGPT that certified financial planners dislike.
Also see how to build wealth, according to ChatGPT.
High-Risk Stocks for Higher Returns
Rose cautioned that high-risk stocks are definitely not “suitable for everyone, especially those with low risk tolerance or short-term goals.”
To put this to the test, GOBankingRates posed the following question to ChatGPT: “Which stocks should I invest in to double my savings?”
Some of the suggestions ChatGPT gave were renewable energy, healthcare and (humorously) artificial intelligence. And, yes, these are three very high-risk stocks. (Of note: ChatGPT does not label them high risk; it relies on the lay person to know.)
The answer did contain a small black box warning that advised considering your risk level and goals prior to investing. But, without any additional context for how much money the user actually has in savings, what their time horizon may be or what the rest of their investment portfolio looks like, the results are more of a reference point than a real-world suggestion.
Speaking to Fortune Media, financial advisor Thomas Kopelman confirmed, “The problem with using A.I. for financial advice is that ChatGPT doesn’t know what questions to ask.”
Whole Life Insurance
Whole life insurance is a permanent life insurance policy that provides life-long coverage, steady premiums and built-in investment vehicles. This differs from term life insurance, which runs for specific lengths of time but has much lower premiums and no investment component.
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“I’m not a big fan of whole life insurance, especially for younger investors, but it often suggests it as something to consider, ignoring the high costs it brings to the table,” Rose said.
Take this sample question GOBankingRates asked ChatGPT: “I’m 30. Which life insurance should I purchase?”
Up came every kind of life insurance policy: term, whole, universal, variable, indexed universal and final expense.
While each did list pros and cons (generally price and term limits), all policies seemed to be put on an even playing field. ChatGPT never answered the question or took age into account. This leaves the user to assume the choice is about preference rather than unique fit.
If the probability is good that a 30-year-old isn’t going to kick the bucket any time soon, it makes less sense to suggest a higher monthly premium at a time in life when finances aren’t plentiful.
Stopping Retirement Contributions To Pay Off Debt
Rose said completely stopping retirement contributions could be a mistake because ChatGPT “ignores the long-term benefits of compound interest.”
Because ChatGPT cannot examine the big picture or account for individual circumstances, it could suggest an oversimplified model where you are actually losing money in the long run.
Rose told GOBankingRates that people should try to pay off debt while still contributing to retirement accounts.
“They should do both, even if it’s only putting the minimum amount in their 401(k),” he said. “This way they get familiar with their 401(k) and how the markets work.”
Ken Lotocki, chief product officer at Conquest Planning, said it best when he compared ChatGPT to WebMD: “You can put in your symptoms — or financial goals — and ChatGPT will come back with recommendations on what to do. But you should still see a doctor.”
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