Using Generative Artificial Intelligence As A Financial Tool – Bankrate.com

As the New Year approaches, many people are addressing financial resolutions. But a significant number of Americans feel like theyre behind on achieving their money goals.

About 80 percent of Americans didnt increase their emergency savings this year, according to a recent Bankrate survey. Nearly one-third of households (32 percent) have less emergency savings now than at the start of 2023.

Generative AI has emerged as a useful tool for financial advice, offering consumers a free way to receive customized guidance on everything from creating a budget to managing an investment portfolio.

Despite a strong economy, many Americans are struggling to achieve their financial goals as 2023 comes to a close.

Nearly half of Americans are struggling to be financially secure, according to a Bankrate survey. Still, many of the Americans surveyed are optimistic about their financial future 46 percent of Americans who dont feel financially secure believe that they will someday.

About 2 in 5 Americans (41 percent) surveyed blamed insufficient retirement funds as the primary factor fueling their feelings of financial insecurity. Building an emergency savings fund is another common aspiration, yet 60 percent of Americans feel theyre behind on meeting this goal, too.

More people are now turning to AI platforms, like ChatGPT, as a cost-effective way to manage their finances. The public debut of ChatGPT in November 2022 has boosted consumer awareness of AIs potential: The chatbot currently has over 100 million users and the website generated 1.6 billion visits since June 2023.

For many Americans, their financial landscape feels like a battlefield an on-going struggle to save for major life events while combating rising prices.

While inflation is down significantly from the summer of 2021, interest rates remain at their highest level in more than 15 years. From buying a car to purchasing a home to paying down credit card debt, consumers are feeling the impact of broader economic factors on their bottom line.

Americans feel behind in achieving their financial goals due to a variety of factors:

For Americans struggling to get ahead, AI offers a way to obtain personalized advice and financial information at home for free.

AI can be a useful tool to understand how to organize basic finances like budgeting, saving, and paying down debt, says Stephanie Genkin, a certified financial planner and founder of My Financial Planner, LLC in Brooklyn, New York. While not always 100 percent reliable, its a great place to start to gain financial literacy.

In the not-so-distant past, managing money often meant sitting down with a financial advisor or conducting your own in-depth research. Information wasnt always readily available or free.

Flash forward to today, when the financial industry is experiencing a digital revolution. Consumers now have access to easy online banking, handy budgeting apps and even robo-advisors that use complex algorithms to help with investing.

While these advancements make money management more convenient and accessible, the advice they offer if any is often generic.

That lack of personalized guidance is changing with artificial intelligence, specifically AI chatbots. These digital assistants offer the potential to fill 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 robot. They provide access to financial planning information and insights once only available for a fee from an advisor.

One big advantage of AI is its ability to analyze vast data sets quickly. AI can review your income, expenses, savings, investments and financial goals, offering advice tailored to your unique situation. Users can also get guidance on creating a budget or understanding insurance products.

Other AI-driven financial tools include:

Consumers are also getting more comfortable with the idea of AI-integration in financial planning. In fact, nearly 1 and 3 investors would be comfortable using generative artificial intelligence to receive financial advice, according to a report by CNBC.

However, its crucial to note that while generative AI can be a valuable tool, it cant replace human judgement. Sure, AI can analyze large amounts of data, but its not going to provide you with specific investment recommendations. Certain aspects of your financial life still require a more nuanced approach.

Also, OpenAI, the company that developed ChatGPT, warns that the chatbot sometimes writes plausible-sounding but incorrect or nonsensical answers.

For consumers, AI can enhance financial decision-making but it cant replace it. Experts recommend finding a reliable source to vet information provided by a chatbot.

I wouldnt make any big financial decisions without also speaking to a fiduciary, says Genkin.

Keep in mind: While AI chatbots are efficient tools for time-saving activities, some of the content generated can be unreliable or outdated.

Consumers arent the only ones using AI to manage money.

For years, financial firms have utilized the technology for everything from fraud detection to credit scoring. As generative AI evolves, more financial advisors are finding new ways to incorporate the technology into their workflows to streamline everyday tasks such as research, stock market analysis and report generation.

Jeremey Finger, a certified financial planner and founder of Riverbend Wealth Management in Myrtle Beach, South Carolina, says he thinks chatbots can be an efficient tool for advisors by helping them simplify tasks like drafting emails to clients.

I think the danger, especially for clients, lies in assuming the information it provides is true, says Finger. It also cant ask a client thoughtful follow-up questions. It only works off the information you put in.

For example, if someone with a disability or terminal illness fails to input those details into a chatbot, the advice they receive wont be tailored to their needs.

To assume AI is taking those things into consideration is poor judgement, says Finger.

Robo-advisor: A type of automated financial advisor that provides algorithm-driven portfolio management and investing services with little to no human intervention.

Financial advisor: A professional who is paid to offer financial advice to clients. They typically offer guidance on retirement, personal finances and investments.

Rather than turning to AI chatbots, there are other options available if you need personalized financial guidance, including traditional advisors and robo-advisors.

The rise of AI has seen a parallel surge in the popularity of robo-advisors. While not a new concept, robo-advisors have become more sophisticated with the integration of AI, offering users a cheaper and more convenient way to invest.

But creating a comprehensive financial plan involves more than a data-driven investment strategy. Selecting the right financial advisor, whether human or AI-driven, is an important step in achieving financial goals.

Not everyone needs to work with a human advisor, but doing so provides valuable insight and context you might not get with generative AI or even a robo-advisor. Estate planning, which involves drafting legally-binding documents to pass along your assets after you die, is one example of a complex situation that warrants speaking to a human advisor.

But how do you select the right financial advisor? Here are a few tips:

If you need expert guidance when it comes to managing your money or planning for retirement, Bankrate can help you get matched with a financial advisor in minutes.

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A financial advisor provides guidance to help clients manage their money and plan for their financial future. They help track, manage and balance investments as well as offer advice on topics like retirement planning, insurance, buying a home and budgeting.

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Generative models, like ChatGPT, produce human-like responses and can assist in a range of tasks, including financial planning.

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You can set yourself up for success by making your goals specific, measurable and achievable. For example I want to make more money isnt a specific goal, but I want to increase my salary 30 percent over the next three years is.

Once youve defined your goal, dont just set it and forget it. Designate specific times to check your accounts and make adjustments as needed. Its generally recommended to review your progress at least once a month for short-term goals and once or twice a year for long-term goals.

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Using Generative Artificial Intelligence As A Financial Tool - Bankrate.com