How Financial Advice Firms Can Leverage ChatGPT

Stephen Phipps our consultant managing the role
Posting date: 11 May 2023

According to Reid Menge, Global Technology Portfolio Manager for Fundamental Equities at BlackRock, “the applications of generative AI are in the early stages, [but] the capacity of these AI models is doubling every three months…ChatGPT is at the forefront of this revolution.”

Every three months. Let’s consider that for a moment. If ChatGPT’s capacity is doubling at that rate, what does that mean for financial advice firms that could leverage this type of generative AI to streamline processes, save money and become more profitable?

It could mean several things, both positive and negative. Clearly, removing the cost of people might be attractive, especially in such a competitive industry. But there’s also a delicate line to tread. When no two clients are the same and you’re in a highly regulated market, is the best solution really to rely on technology rather than humans to provide advice?

We should also be aware of other predictions, like ChatGPT being able to handle 50% of financial investment jobs. Of course, this doesn’t necessarily mean advice. It could mean those tasks that, if you didn’t have to do them, could free you up to focus more on advice.

To my mind, it all depends on how you use it - yes, you can use it like a search engine to drill down into the financial advice market, but it is so much more than that.

In this article, I’ll explain how I’ve seen financial advice firms start to use ChatGPT, where I think there are some really interesting ways firms could be leveraging it in the future, and where the challenges and benefits lie.

4 ways financial advice firms are starting to use ChatGPT

When you consider that ChatGPT has the fastest-growing user base of all time with 100 million users in the first two months, you know it’s probably something worth looking into. (For comparison, TikTok took nine months, and Spotify a whopping 55.)

And financial advice firms have started to more than look. There are a number of ways I’ve seen firms start to use - or at least think about using - ChatGPT to both improve services and better meet client needs.

1. Providing automated financial advice

Let’s confront the problem child first - one that’s more in the “let’s think about it” phase. Yes, financial advice firms could leverage ChatGPT to offer automated financial advice services to clients. But can they rely on the advice being a) sound and b) personalised?

Clients could ask questions about their finances, investment opportunities or any other financial concerns they have and receive automated, personalised responses based on their individual circumstances and goals. What if ChatGPT provides false information or poor advice that a human financial advisor definitely wouldn’t? There’s also the question of where it leaves financial advice firms from the point of view of Consumer Duty and other financial regulations. I think AI technologies could support in this area, but we have to make sure they are good enough that advice firms will be certain it’s advice they would be happy to provide.

As a side note, this Fortune article is an interesting read. The author pitted ChatGPT against a financial advisor to find out if the advice would be similar, coming to the conclusion that, “ChatGPT was trained to be creative and to generate human-like text. It wasn’t necessarily trained to be right.”

2. Enhancing customer service

This is an interesting one. ChatGPT can be used to enhance customer service. It provides quick and efficient responses to client enquiries that perhaps are more practical than advice-related. Real-time answers reduce both customer and advisor friction, with no need to wait for a human representative to be available

3. Identifying trends and patterns
I’ve seen financial advice firms start to use ChatGPT to analyse client conversations as a way to identify trends and patterns in client behaviour. The aim is to better understand clients' needs and preferences so firms can develop more effective strategies for serving them.

4. Streamlining processes
By automating routine tasks, such as scheduling appointments, answering frequently asked questions and collecting client information, ChatGPT is starting to help advice firms streamline processes and improve efficiency. In a competitive environment, this type of automation can make the difference between staying ahead of the competition and falling behind.

We’re in the early stages of adopting ChatGPT - not just in financial advice, but in many industries - and with more than a billion users as of March 2023, the opportunity this technology could present is something that should be firmly on your radar.

Pros & cons of using ChatGPT in the financial advice sector

Of course, there are both pros and cons of using ChatGPT in financial advice, now and in the future.

Pros of using ChatGPT:

  • Improved efficiency & reduced workload: automate routine tasks such as scheduling appointments, answering frequently asked questions, and collecting client information.
  • 24/7 availability: especially helpful for clients who need advice outside of traditional business hours.
  • Personalised advice: provide advice to individual clients based on their unique circumstances and goals.
  • Scalability: handle a large number of clients simultaneously, which can be especially useful if you have a large client base.
  • Cost savings: save on people costs by reducing the need for human advisors to perform routine tasks.

Cons of using ChatGPT in advice:

  • Limited understanding of complex financial concepts: ChatGPT may not be able to fully understand or provide advice on complex financial concepts or unique client situations, which may require the involvement of a human advisor.
  • Lack of empathy: you simply won’t get the same level of empathy and understanding as a human advisor, which could be a concern for clients who prefer a more personal touch.
  • Jobs at risk: loosely linked to the previous point, it is possible that ChatGPT will put financial advisor roles at risk. According to Forbes, “envisioning a future where AI-driven technology revolutionises traditional financial advisors' role is not necessarily far-fetched.”
  • Data privacy concerns: ChatGPT may collect sensitive client data, which could raise concerns about both data privacy and security.
  • Limited language capabilities: ChatGPT could struggle with understanding non-standard or non-native language, which could limit its usefulness for some clients.
  • Technical limitations: like all technology-based solutions, ChatGPT is inherently subject to technical limitations or outages that could disrupt service.

How advice firms could leverage ChatGPT in the future

As a language model, ChatGPT is continually improving and evolving, and there are a number of ways financial advice firms could potentially use it in the future that aren’t possible now. In fact, ChatGPT could have transformational power in the advice space.

First, and probably the simplest opportunity on this list, you could use ChatGPT to conduct market research as a way of developing more effective marketing strategies and identifying new opportunities for growth. 

Moving forward, we’ll also see a lot more advancements in Natural Language Processing (NLP), meaning ChatGPT will be able to better understand the nuances of human language. This in turn could enable financial advice firms to use ChatGPT to provide more accurate and personalised advice.

And as it becomes better at NLP, you’re more likely to want to integrate ChatGPT with other technologies, such as voice assistants or augmented reality interfaces. This will help you create a more immersive and interactive experience for your clients. Using ChatGPT to provide financial advice via a voice interface or using an AR interface to visualise different investment scenarios provides customers with choice in how they consume their advice. It will likely also provide better accessibility opportunities and help you become more inclusive

ChatGPT also has the potential to analyse data. With the increasing amount of data being generated by financial advice firms, you could use AI to analyse it more effectively, and so provide more accurate insights. The outcomes of this could be identifying new investment opportunities, predicting market trends and making more informed business decisions.

It doesn’t stop there. As ChatGPT becomes more sophisticated in understanding your clients' individual needs and preferences, you could use it to provide personalised financial education, helping them better understand their own finances and make more informed decisions.

Finally, there’s a potential integration with blockchain technology. If you use ChatGPT in conjunction with this new technology, it could have the power to create more secure and transparent financial systems. In the future, could you be using AI tools to provide investment advice on blockchain-based investment platforms or helping clients navigate the complexities of cryptocurrency investing?

Interested in chatting through how you could use ChatGPT or AI tools in your financial advice firm - or even the bigger question of where it’s all going next? Contact me directly and let’s set aside time for a call.

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