As the new year approaches, many people are setting financial resolutions. However, many Americans feel they are falling behind in achieving their financial goals.
Article Summary
Generative artificial intelligence is a useful tool for financial advice, providing consumers with a free way to get personalized guidance on everything from creating a budget to managing an investment portfolio.
Using AI for Financial Advice
Many Americans are struggling to achieve their financial goals as the end of 2023 approaches. Half of Americans report having difficulty achieving financial stability, yet many surveyed Americans believe they are optimistic about their financial future – with 46 percent of Americans who do not feel financially stable believing they will feel stable one day.
AI Financial Tools
In the recent past, managing money often meant sitting down with a financial advisor or doing detailed research yourself. Access to information wasn’t always available – or free.
However, nowadays, the financial sector is experiencing a digital revolution. Consumers now have easy access to online banking services, helpful budgeting apps, and even robo-advisors that use complex algorithms to assist in investing.
Nonetheless, the advice provided by these apps – if any – is often generic. However, the lack of personalized guidance is changing with artificial intelligence, specifically smart chatbots. These digital assistants are capable of bridging 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 bot. They provide access to financial planning information and ideas that were previously available only at a cost from an advisor.
One of the significant advantages of AI is its ability to quickly analyze vast amounts of data. AI can review your income, expenses, savings, investments, and financial goals, providing personalized advice for your unique situation. Users can also receive guidance on budgeting or understanding insurance products.
Other AI financial tools include:
- Automated budgeting and expense tracking
- AI-driven investment platforms for smart investing
- Customized financial planning based on your goals
- Debt management strategies
Improving Financial Literacy
Consumers also feel more comfortable with the idea of integrating AI into financial planning. In fact, nearly one-third of investors are comfortable using generative AI for financial advice, according to a report from CNBC.
However, it is important to note that generative AI can be a valuable tool, but it cannot replace human judgment. Certainly, AI can analyze large volumes of data, but it will not provide you with specific investment recommendations. Some aspects of your financial life still require a more nuanced approach.
Additionally, OpenAI, the company that developed ChatGPT, warns that the chatbot “sometimes writes answers that seem reasonable but are incorrect or nonsensical.”
For consumers, AI can enhance the financial decision-making process but cannot replace it. Experts recommend finding a reliable source to verify the information provided by the chatbot.
“I wouldn’t make any major financial decisions without also consulting a financial advisor,” says Jenkins.
Using AI in Financial Consulting
It’s not just consumers who are using AI to manage their money.
Financial firms have been using technology for years for everything from fraud detection to credit assessment. As generative AI evolves, more financial advisors are finding new ways to integrate technology into their workflows to streamline daily tasks like research, stock market analysis, and reporting.
Experts believe
Jeremy Finger, a certified financial advisor and founder of Riverbend Wealth Management in Myrtle Beach, South Carolina, believes that chatbots can be an effective tool for advisors by helping them streamline tasks such as drafting emails to clients.
Finger says, “I think the danger, especially for clients, lies in assuming that the information provided is correct.” “It also can’t ask detailed questions of the client. It only works based on the information you provide.”
For example, if someone with a disability or chronic illness does not enter those details into the chatbot, the advice received will not be suited to their needs.
Finger states, “To assume that AI takes these things into account is a poor judgment.”
How to Choose the Right Financial Advisor
Robo-advisor: A type of automated financial advisor that provides portfolio management and investment services based on algorithms with minimal or no human intervention.
Financial advisor: A professional who charges a fee to provide financial advice to clients. They typically offer guidance regarding retirement, personal finance, and investments.
Rather than relying on smart chatbots, there are other options available if you need personalized financial guidance, including traditional advisors and robo-advisors.
The rise of artificial intelligence has seen a parallel increase in the popularity of robo-advisors. While not a new concept, robo-advisors have become more sophisticated with the integration of AI, providing users with a cheaper and more convenient way to invest.
However, creating a comprehensive financial plan requires more than a data-driven investment strategy. Choosing the right financial advisor, whether human or AI-backed, is an important step in achieving financial goals.
Not everyone needs to work with a human financial advisor, but doing so can provide valuable insights and context that you may not get from generative AI or even from a robo-advisor. Estate planning, which involves drafting legal documents to pass on your assets after your death, is an example of a complex situation that calls for speaking with a human advisor.
But how do you choose the right financial advisor? Here are some tips:
- Look for a fee-only financial advisor: A fee-only financial advisor is a professional committed to working in your best interest – not in the interests of insurance companies or financial institutions. They will provide unbiased, tailored advice that you can rely on.
- Check their credentials: Some credentials carry more weight in the financial planning industry than others. For example, a certified financial planner must complete at least three years of experience, pass a rigorous exam, and maintain continuing education.
- Understand their fee structure: Advisors can be compensated in various ways. Make sure you understand how the advisor is paid, and that the cost aligns with your budget.
- Ask questions: Interview several advisors before making your decision. When meeting with potential advisors, inquire about their experience and ask about specific cases they have handled. Pay attention to their communication style and transparency.
What is a Financial Advisor?
A financial advisor provides guidance to help clients manage their money and plan for their financial futures. They assist in tracking, managing, and balancing investments and offer advice in areas such as retirement planning, insurance, home buying, and budgeting.
What is Generative AI?
Generative AI is a branch of artificial intelligence that involves creating content – such as text, images, and videos – based on patterns and information learned from large data sets.
Generative models, like ChatGPT, produce human-like responses and can assist with a range of tasks, including financial planning.
How
Can I Achieve Financial Goals?
Although the process of achieving financial goals may look slightly different for everyone, there are three general steps to follow: clearly defining the goal, setting a timeframe, and monitoring progress.
You can achieve success by setting specific and measurable goals and verifying their achievement. For example, “I want to increase my income by 30 percent over the next three years” is a specific goal, while “I want to increase my income” is not a specific goal. Once you’ve set your goal, don’t just set it and forget it. Schedule specific times to check your accounts and make necessary adjustments. Generally, it is recommended to review your progress once a month for short-term goals and once or twice a year for long-term goals.
Source: https://www.aol.com/using-generative-artificial-intelligence-financial-110001948.html
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