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Financial information is cold, hard numbers—so it feels like something a generative AI bot could easily become an expert in. Still, when I asked ChatGPT how to invest my money, its initial response struck a cautious note: “when it comes to investing money, there is no one-size-fits all.” There are a lot of factors to consider, it continued, typing out a few: financial goals; time horizon; and personal circumstances.
It was very basic—not the detailed financial strategy I was looking for—so I tried something more specific:
‘What is the best investment strategy for a 42-year-old male, with a household income of £180k, living in the UK, with £4,000 in monthly outgoings, 3 dependants and £2.1m of investible savings, who would like to continue to build their wealth while preserving what they’ve accrued to date?’
The cursor blinked motionless for a while; even the bot needed a bit of time to respond to this prompt. The answer that eventually emerged seemed comprehensive: a ten-point investment strategy spanning everything from setting up an emergency fund to estate planning.
When I ran the AI-generated plan past Harry Bell, Charles Stanley’s director of financial planning, he thought the general gist was fairly useful. “There’s nothing specifically wrong,” he says. “But what you miss is a lot of nuance.” Financial planning may seem like a numbers game, but how you spend your money is actually a very emotional thing. “The job of a financial planner is to really understand the client and what makes them tick,” says Bell. “Because the right decision for an individual is not always the most efficient.”
The first step in ChatGPT’s investment strategy is to “ensure you have an emergency fund covering at least 6-12 months’ worth of living expenses”. That’s a standard, sensible thing to do, says Bell, “but it doesn’t explain why you should do it, and the explanation is sometimes very important.” Six months might be right for one person, but 12 might be better for another. “Not because of some sort of empirical piece of data, but because of who they are,” says Bell. “It’s what helps them sleep at night.”
Someone who, based on the data, only needs a six-month kitty, may actually only feel secure if they have nine or 12 months’ expenses in the bank. That difference is key, says Bell, “because ultimately, if people have peace of mind in the financial decisions they’re making, they can get on with their lives and not worry about money.” The bot does suggest evaluating your risk tolerance, but it’s difficult to accurately do that yourself, says Bell. “If you were to ask most people, they’d say they were medium risk,” he says. A financial advisor’s job is to question that belief, then adjust it based on the specific financial goal.
“From a behavioral economics point of view, we invariably do exactly what we shouldn’t be doing," says Bell. Most of us sell when the market goes awry, and buy when we’re feeling comfortable—so a naive investor following their instincts could have negative repercussions. “It’s hard to replace an expert,” says Bell, “and the more complex it gets, the more opportunity there is for you making a very expensive mistake.”
ChatGPT does have some helpful suggestions: paying down debts (a “no brainer”, says Bell); planning for retirement (“sensible”); and building a well-diversified investment portfolio (“Makes sense.”)
“But how do you do all that?” asks Bell—it's a key question, and one of the bigger flaws in the initial AI advice, so I ask the bot to elaborate: How should I divide the £2.1m of investible assets I told it I have? It suggests mostly stocks (60-70 percent), plus 20-30 percent bonds, and the rest in real estate, commodities, hedge funds or kept liquid. Importantly, it adds, “consulting with a financial advisor who can provide personalized guidance is highly recommended.”
This personalized advice feels increasingly essential as Bell and I continue talking through the AI-generated strategy. While ChatGPT gives a few good pointers—like staying informed about the markets; considering charitable giving; and regularly reviewing your portfolio—it also misses some big things. “Insurance isn’t mentioned here at all,” says Bell. “What happens if something goes wrong?” The bot also ignores several tax-efficient investment schemes, and doesn’t consider how my current outgoings could be optimized.
But the biggest gap in ChatGPT’s advice is figuring out how all the elements link together, rather than just optimizing each one individually. “There’s a lot of interconnectedness in families which will never get considered by an AI bot,” says Bell, pointing specifically to intergenerational planning. “The best education planning anyone could do is to get the grandparents to pay the school fees,” he says. That will reduce the grandparents’ inheritance tax bill, while also giving parents more money left over to invest or add to their pension.
Despite the gaps in the AI’s investment strategy, Bell remains positive. “The thing is, some advice is better than no advice,” he says. But in this case, it seems like the best financial advice ChatGPT gave me was: “Consider working with a financial advisor.”
Find out more about securing your financial future with Charles Stanley.
The value of investments can fall as well as rise. Investors may get back less than invested. Charles Stanley & Co. Limited is authorised and regulated by the Financial Conduct Authority.
This article was originally published by WIRED UK
