Is ChatGPT Really Wealth Management’s Next Big Worry?

If you’re in wealth management or technology, you’ve no doubt heard about ChatGPT by now—the latest threat to the human financial advisors. But like past threats, such as roboadvisors, ChatGPT is not a threat of replacement that you need to fear, but a learning opportunity to re-emphasize the most critical skill set a human advisor can have—advice engagement!

The industry has had “will technology replace us?” anxiety before. At the InVest 2017 conference, almost every keynote presentation debated the merits of human advisors versus roboadvisors. And all of them came to the same conclusion— it’s not “OR”, it’s “AND”. That the winners would be the firms that were able to leverage a hybrid experience. We all agreed that human interactions will never completely go away, but that technology would help us have better interactions or help us initiate interactions with a larger demographic. That consensus has played out. Just over five years since that conference, firms have leveraged automation to enhance their operations and the perceived threat of roboadvisors decreased.

We can do the same with ChatGPT. 

ChatGPT is an AI chatbot. But, unlike previous chatbots we’ve interacted with, this one goes above and beyond answering yes or no questions or providing a pre-written article on the topic mentioned in the question. ChatGPT is developed to provide human-like responses to complex questions and learn from its mistakes. Sounds alarming. But is it really? 

When the question of whether roboadvisors would replace human advisors came up, the wealth management industry focused on the value of advice and our communications with clients. Now, it seems ChatGPT is directly challenging how well we do that and as a result is viewed as a replacement for our value. But not so fast. While ChatGPT is an exciting new technology, it does have its limitations that human advisors do not.

Here’s how firms can respond: 

Understand that context is still king and ChatGPT can’t do everything 

Consider the premise of this recent article published on Insider. The headline claims ChatGPT “explained a 5-part strategy for balancing a portfolio”, but an experienced wealth management professional can read through the article and see that the title is a bit misleading even though the information provided was true. 

First, the “5 parts” do not by themselves compose an investment strategy, but are actual components of what could be a strategy. Furthermore, the 5 parts are not actionable investments—they lack specificity and context. Second, there was no balancing of the portfolio. To balance a portfolio, means we know where the investor is starting and without any background on the investor receiving this information, we can’t balance the portfolio for a recession.

So while the information provided by ChatGPT isn’t wrong, it requires context to actually be put into practice. Investors who aren’t as savvy as wealth management professionals are at risk of accepting ChatGPT’s information as complete and attempt to implement it on their own. Advisors should be prepared to address ChatGPT’s shortcomings when asked by clients or pre-empt those who might not ask. 

Additionally, one of ChatGPT’s limitations cited on the website is that the model would ask clarifying questions but usually guesses what the user intended. This can have disastrous consequences in the wealth management world and is exactly what an advisor can navigate through a detailed planning and investment process. Again, requiring advisors to message the importance of context in financial planning and investment strategies broadly.

Use ChatGPT to differentiate “simple” and “yes, but…” questions and enhance the client experience 

I love that making and changing flight reservations is easier than ever. And that sometimes I can use the app and avoid calling the dreaded phone line that is suspiciously always experiencing a ‘higher volume of calls than average’ when I have a simple request like rebooking a delayed connecting flight. (This is a positive for client experience.) But when I tried to change a reserved but not confirmed flight, I needed to cut past the chatbot to get answers. That’s the difference between a “simple” and a “yes, but” question. Advisors that identify the difference between these can make it easier for their clients and prospects to find the answers to the simple questions by leveraging ChatGPT and focusing their time delivering on the high value “yes, but” questions.

Think like an investor and take ChatGPT on a test ride. Consider asking questions that you think your clients and prospects have and evaluate the answer. How can you leverage that or improve upon the answer? Categorize the questions into the two groups and employ the tools best fit to handle each category.

ChatGPT is only the first of many of these tools to enter the market. At F2 Strategy, we obviously believe technology is a great thing that will continue to improve our lives. But that doesn’t mean human interactions will become obsolete. As we navigate the complexities and emotional journeys of financial wellness, advisors that can leverage technology to improve their engagement will continue to prove their worth. 

For a deeper understanding of AI tools like ChatGPT, and how they can facilitate greater efficiency and client experience, get in touch.

Share This article

Latest Insights