Are Open AI Apps Like ChatGPT Reliable for Financial Advice?

Jun 23, 2023 / Reading Time: Approx. 10 mins

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Artificial Intelligence (AI) has seamlessly Integrated into our daily lives, often without our conscious realisation. Its influence has increased to such an extent that many individuals remain unaware of its impact and the scale to which we rely on it. Our daily activities are mostly driven by AI technology from dawn to night. Many of us pick up our laptop or cell phone as soon as we wake up to begin our day. Our decision-making, planning, and information-seeking processes have become interlinked with AI, operating almost effortlessly in the back ground.

Artificial Intelligence (AI) and machine learning are being used extensively in our society; everyday activities such as online shopping, sending emails to friends, or even generating academic presentations for students include interacting with AI technology.

How Artificial Intelligence Works?

Unlike the natural intelligence displayed by both humans and animals, AI is the intelligence demonstrated by machines like robots. It refers to the ability of a computer or a robot operated by a computer to carry out tasks that humans traditionally do with their knowledge and discretion. Examples of particular AI applications include expert systems, machine learning, natural language processing, speech recognition, and machine vision.

Artificial Intelligence (AI) may take many different forms, from straightforward tools like chatbots used in customer service applications to sophisticated machine learning systems used by enormous corporations. The built-in smart assistants on our phones, like Siri, Alexa, and Google Assistant, are the most notable instances of AI that most of us are aware of and use. Google has introduced a new 'Help Me Write' function for Gmail that uses Artificial Intelligence to create email draughts depending on user input.

Whether it's for personal use or marketing to certain demographics for business purposes, social media networking is a vital component of modern life. AI has significantly accelerated the expansion of the social media and entertainment industries. For instance, there is an AI-influencer (India's 1st Meta-influencer) on Instagram that functions much like a human influencer would, generating content, promoting brands, etc. The biggest names in technology are developing the next-generation AI technology for self-operating machinery. For instance, the self-driving/autonomous automobiles produced by companies like Tesla, Toyota, Mercedes-Benz, and Audi, as well as 'Sophia', the first Artificial Intelligence (AI) robot. As a result, the market for AI has a lot of unrealised potential.

Having said that, AI has evolved the functioning of various sectors and industries of the Indian economy, especially the fastest-growing banking, financial services and insurance sector (BFSI).

The Impact of AI on the Banking And Finance Sector

One industry that has adopted technology advancements earlier than many others is banking. AI is used by banks in many different contexts, such as identifying any fraudulent behaviour, analysing consumer financing patterns, disseminating customer offers, etc. Have you ever received a notice from a bank when carrying out a transaction on a new tool? This is an example of an ability scam that AI can detect. Examples of AI-infused technology include the alerts we receive from banks and other financial institutions on their goods and services.

[Read: Should You Consider Holding Your Money in Digital Banks?]

Consequently, many financial services, such as online instant loans, are now offered using AI technology. After evaluating his credibility, the borrower enters his information, and the app or website provides a credit limit or loan amount. Additionally, there are several applications and websites that provide services like online stock trading, IPOs, and investment in mutual funds, FDs, and bond investment. Now that these apps are run by AI technology, there are robo-advisors that provide financial advice to investors, which may affect their investing choices.

Are Open AI Apps Like ChatGPT Reliable for Financial Advice?
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What Are Robo-advisors?

Robo-advisory has been around for a few years. Robo-advisor is nothing but a digital financial advisor who provides automated investment solutions online. The concept of having an Artificial Intelligence (AI)-Based Robo-advisor was to provide investors with a self-operating financial advisor who will guide them in financial planning, investment planning, tax planning, and retirement planning, similar to a human financial advisor.

[Read: How Robo-Advisory Is Influencing Investors' Perception And Way of Investing]

The text-based artificial intelligence model ChatGPT by OpenAI, which is the buzz of the town, is already being praised as a game-changing tool. Since it can complete the same activity faster and cost-effectively than a human could, it is causing people to worry that they may lose their jobs. AI tools like ChatGPT can learn human and computer programming languages, and they don't accidentally forget things like humans do. In light of this, some individuals are concerned that AI may automate away a large number of jobs in the ensuing decades.

Recent news stories have been dominated by Google's Bard and OpenAI's ChatGPT, both of which have enormous informational databases and creative capabilities. They are artificial intelligence chatbots that can have conversations.

In November 2022, Artificial Intelligence laboratory OpenAI had launched ChatGPT. In the months since some users across the world have been asking all sorts of questions to ChatGPT and posting the answers/responses on social media. The internet has been abuzz with discussions of how advanced AI could reshape society, including the financial services industry.

Could financial advisors eventually be replaced by Artificial Intelligence such as ChatGPT?

ChatGPT is a subscription-based service where users pay to access a chatbot for customer service, virtual assistance, or other tasks. The chatbot has recently garnered a lot of popularity due to its capacity to comprehend human language and offer thorough responses to basic inquiries. Nowadays, however, people are using Artificial Intelligence for a variety of purposes, including guidance on personal finance.

Before the internet and social media pushed investing into the digital era, people used to get their investment knowledge through newspapers and publications. Because of its large knowledge base, ChatGPT has naturally grown to be a very sought-after instrument for intrepid investors seeking to outperform the market and potentially even use it as their primary financial advisor.

You see, ChatGPT may provide you with detailed explanations about financial planning and queries related to investment planning or other aspects of personal finance. However, it is not 'intelligent' enough to replace your personal financial advisor.

Here are five reasons why you should be careful of ChatGPT as your financial advisor:

  • Knowledge Limitations

    Unfortunately, ChatGPT has limitations when it comes to giving financial advice despite having access to a vast amount of information and being able to examine data to give insights. For instance, ChatGPT's free version has a knowledge cutoff of 2021, which implies it is out of date about events that have happened after 2021 or current market trends.

  • Non-personalised Financial Planning

    One man's meat is another man's poison; thus, any financial advice is intended to be 'personal'. Simply said, financial planning is always individualised and developed based on the investor's and advisor's responses to questions asked. Financial planning is not a one-size-fits-all approach; rather, it requires careful preparation based on each individual's risk appetite, time horizon for investments, and financial goals.

  • Lack of Emotional Intelligence

    An AI chatbot is incapable of handling the emotions that result from financial decisions. Even if all the rules are written down, most people still won't be able to follow them if frequent counselling is not provided. Personal financial advisors examine their investors and provide solutions based on their requirements, values, and objectives. Financial advisors require skills that an AI chatbot cannot simply imitate, such as emotional intelligence, empathy, and the ability to establish a good rapport with the investor.

  • No Ability to Review Or Rebalance

    ChatGPT only has the information that you will provide at the beginning to start the conversation. It won't counter-question you further to know in-depth about your finances. As a result, it won't be able to steer you appropriately, as a human, financial advisor would do.

    An AI machine will not be competent to readjust the financial plan or investment portfolio advice provided to you based on any changes in your circumstances. There may always be circumstances in which you need to simply reroute or refresh your strategy or investment portfolio, in which case only a human, financial advisor will be able to understand your position and work with you to find a solution.

    Apart from this, according to ChatGPT itself, it can only provide generalised information and not personalised financial advice tailored to one's specific requirements. When asked about its competence to provide tailor-made financial advice, ChatGPT replied with, "As a language model AI, I can provide information and insights on personal finance. However, I am not a licensed financial advisor and cannot provide personalised financial advice tailored to your specific situation."

To conclude...

This clarifies that you may use the AI chatbot for your convenience and to have an idea about managing your personal finances; however, avoid making any important financial decisions based on this information. Both Google and Open AI say their chatbots should not be relied on for financial advice. While ChatGPT may be a great innovation that could help you solve several generic financial and other problems, it has its limitations. The capabilities of AI make it an intriguing tool. But like any instrument, if misused, it might cause more harm than good. To improve your financial understanding, you may thus think about utilising such Open AI apps, but when it comes to getting a financial advice, you should think about consulting a SEBI-registered financial or investment advisor.


MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.

She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

Disclaimer: This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision.

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