Artificial intelligence (AI) is advancing rapidly, and traders and investors are finding ways to leverage this progress to gain an additional edge. Reference [1] examines the effectiveness of AI—ChatGPT, in particular—in personal finance.
Unlike previous studies that focus on quantitative aspects, the paper evaluates AI performance in a qualitative way. Specifically, it prompts ChatGPT with 21 personal finance cases and assesses not only the accuracy of its suggestions but also their contextual appropriateness, emotional intelligence, and attention to detail. These dimensions are critical for real-world impact, especially when users make decisions based on AI-generated advice. The authors pointed out,
We see clear improvements in ChatGPT-4o compared to ChatGPT-3.5, such as more detailed suggestions and alternative solutions (out-of-box thinking). However, the newer model, in its current form, does not appear to be capable of replacing human financial advisors. This is because it tends to provide generalized advice, overlooks important aspects of the financial planning process, such as determining client goals and expectations, and makes mathematical errors in retirement problems. Moreover, ChatGPT sometimes lacks a moral or legal compass…
We find that the quality of financial advice improves (but not always) with prompt engineering. However, the issue is that through prompt engineering, ChatGPT appears to mirror the focus of the user’s attention. If a user is not thinking about taxes, ChatGPT may still provide useful financial advice, but it may omit any considerations of taxes….However, we suggest that this tool be used with great caution as its omissions of important details, such as taxes and legal issues could create problems for users. Finally, we believe that the benefits of using ChatGPT outweigh its drawbacks in the personal finance domain.
In short, the paper finds that ChatGPT-4o shows meaningful improvements over earlier versions in handling personal finance cases, but it still cannot replace human advisors due to its generalized advice, omissions of key details, and occasional mathematical, legal, or moral oversights. This study concludes that ChatGPT is useful for initial guidance, yet must be used with caution, and that in personal finance, the benefits of using ChatGPT outweigh its drawbacks.
Let us know what you think in the comments below or in the discussion forum.
References
[1] Minh Tam Tammy Schlosky, and Sterling Raskie, ChatGPT as a Financial Advisor: A Re-Examination, Journal of Risk and Financial Management, 18(12), 664.
Originally Published Here: ChatGPT as a Personal Financial Advisor: Capabilities and Limitations
source https://harbourfronts.com/chatgpt-personal-financial-advisor-capabilities-limitations/
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