How To Build Wealth, According to ChatGPT
By Damaris Gingerich, AIF®
Most of us have heard of the new generative AI technology, ChatGPT, which is taking the internet by storm. ChatGPT can answer questions about history, write a bedtime story, help someone figure out a problem in a line of code, write a poem about coffee, write a cover letter for a job application, engage in conversation, and more.
Open AI describes ChatGPT as a sibling model to InstructGPT, which is trained to follow an instruction in a prompt and provide a detailed response. On their blog they say, “We’ve trained a model called ChatGPT which interacts in a conversational way. The dialogue format makes it possible for ChatGPT to answer follow-up questions, admit its mistakes, challenge incorrect premises, and reject inappropriate requests.”1
ChatGPT is unlike the sentient robots in WALL-E or I, Robot. A recent article2 from Business Insider explains that ChatGPT has vast potential for creative prompts and providing information in a conversational tone. It has even passed sections of the bar exam. In the last two years, other AI technologies have been unveiled or announced, such as DALL-E, Gato, Google’s Bard, and Microsoft’s AI-powered version of Bing. We’re in the midst of a wild-west revolution within AI technology. There are likely countless applications across varied industries which are untapped and unregulated at this point. The potential is exciting, if also a little frightening. The utilization of AI technology has the potential to be a disruptor on the scale of the internet’s advent.
Investing has already experienced its own disruption by technology through the introduction of robo-advisors. Platforms such as Schwab’s Institutional Intelligent Portfolios, Betterment, Wealthfront and others have utilized algorithmic models that keep a portfolio aligned to a chosen allocation with very low fund costs. There are even options through select platforms to pay an additional fee for access to the advice of a CFP® professional to help navigate bigger questions.
However, there are some things that technology can’t do. I asked ChatGPT how to build wealth and this was the response:
There are several ways you can build wealth, here are some tips:
- Create a budget: Building wealth starts with managing your money effectively. Create a budget that tracks your income and expenses, so you can identify areas where you can save money.
- Save and invest regularly: Develop a habit of saving money regularly and invest it wisely. Start small and build your way up over time. Make sure to diversify your investments to minimize risk.
- Start a side hustle or business: Consider starting a side business or finding a way to monetize a hobby or skill. This can help you earn extra income and build wealth over time.
- Focus on building assets: Assets are things that generate income or appreciate in value over time. Examples include stocks, real estate, and businesses. Focus on building assets that will help you build wealth over the long term.
- Reduce debt: Debt can be a significant barrier to building wealth. Focus on paying off high-interest debt first and then work on reducing your overall debt load.
- Educate yourself: Read books, attend seminars, and learn from experts in personal finance and investing. The more you know, the better equipped you will be to make informed decisions about your money.
Remember, building wealth takes time, patience, and discipline. Stay committed to your goals, and you’ll be on your way to building wealth over time.
This is solid, basic advice and entirely appropriate for someone in their twenties or thirties and in the beginning stages of building wealth. To this foundation, we’d add the importance of choosing an appropriate allocation for your risk tolerance and time horizon, focusing on low-cost diversified mutual funds and ETFs, getting tax counsel and estate plans, and avoiding common cultural lifestyle and overspending pitfalls.
Will human financial advisory firms become obsolete as a result of robo-advisors and AI technologies? In short, no. There are a few key things that technology can’t replace in an advisory relationship. These are truth, time, and trust. Erica Orange of The Future Hunters addressed this very topic in a presentation3 attended by our analyst Cliff Aque. For instance, ChatGPT can be a useful tool, but can’t accurately compute basic math. Forbes cites some other deficiencies4 including the inability to express empathy, difficulty in understanding context, and lack of emotional intelligence. Likewise, a robo-advisor could maintain a chosen allocation and harvest tax losses but is lacking the relational and long-term complement of a human relationship.
In a world of digital solutions, an independent fiduciary wealth advisor provides trust, time, and truth. The first of these key offerings to clients is trust. Fiduciary advisors have an obligation to put client interests first in every decision, trade, and recommendation. Advisors often work with clients for decades and help to guide them through different seasons of life. This longevity allows for unique insight to provide personalized recommendations because, after all, an output is only as good as its inputs.
Where human advisors can really shine is teasing out a client’s goals over time – helping them to understand their deepest desires and then to see how their wealth and planning (or lack thereof) might add or detract from achieving those objectives in a way that’s consistent with their values. An advisor can evaluate and point out how fear might be based on faulty assumptions. They can sit with a client and explain a concept until it’s fully understood or continue to ask questions to reveal the genesis of an issue or goal. By helping clients manage their wealth and planning, advisors also give valuable time back to clients by lightening the demands on their time and attention.
Finally, fiduciary investment advisors have a duty to tell the truth. In a world full of get-rich-quick schemes, never-pay-tax-again offerings, hidden fees, and Ponzi schemes, the third key offering is honesty. Independent fiduciary investment counsel means that nobody else compensates the advisor for their advice. The advisor bears the responsibility to communicate their recommendations with transparency and clarity as well as engaging in dialogue around the details of their advice. Finding an advisor with which to engage in a relationship can alleviate some natural concerns that come with trusting someone’s own use or implementation of technology. A good advisor can soften those conversations with empathy and work toward a plan for a successful outcome together.
Time will prove the applications that AI technology has in our industry, but those on the cutting edge are putting forth the idea of augmenting human intelligence – humans and machines working together to perform tasks quickly, consistently and in a way that allows the true needs of a client to be addressed with greater efficiency. In the meantime, we will continue to deliver trust, time, and truth to those who allow us the honor of stepping into their lives in a lasting and meaningful way.