Would you trust AI (artificial intelligence) with your money? Ask baby boomers, millennials, and Gen Z-ers, and you’ll probably get widely varying answers.
According to the World Economic Forum’s (WEF) 2024 Global Retail Investor Outlook, a staggering 41% of both Gen Z-ers and millennials said that they’d entrust AI assistants to manage their investments — which is nearly thrice the rate of the 14% of baby boomers who said they’d do the same.
The survey, which was conducted with more than 13,000 respondents across 14 countries, reveals a marked shift in the public’s perception of financial decision-making. From the stock-picking expertise of AI-powered ETFs (exchange-traded funds) to sleek AI-enabled robo-advisors, AI tech is transforming how people build and monitor portfolios in the digital age. The question is: how prudent is it?
All About Investing With AI
According to the survey, users say that generative AI tools such as ChatGPT have helped immensely in areas such as credit score improvement, investment planning, and saving and budgeting. What’s more, a larger percentage of younger individuals and generations in emerging markets are increasingly interested in investing to build wealth and enhance financial stability.
With AI-powered financial tools becoming more state-of-the-art, younger investors are skipping human advisors and instead turning to algorithms that promise personalised recommendations, lower costs, and efficiency.
For instance, there are automated investment platforms incorporating AI and ML (machine learning) into their algorithms in the form of robo-advisors. They assess risk profiles to rebalance existing and design new portfolios according to the investors’ profiles. Advanced investors can even deploy algorithmic trading bots (AI agents) that execute pairs-trading, mean-reversion, and momentum strategies 24/7, reacting to micro-signals far, far faster than human traders. Then, there are AI-powered ETFs, which leverage ML to analyse huge amounts of historical data, informing portfolio composition.
AI assistants are making inroads into everything, including financial investments. Chatbots powered by generative AI can answer ad‑hoc questions about individual stocks or sectors, summarise market‑moving headlines, and even deliver insights on earnings call transcripts in real-time.
The tech is accessible – and it’s free.
In fact, one of the most important reasons for quite a few non-investors not investing in the first place is a lack of knowledge about how and where to begin. Plus, they also say that they lack confidence in their own ability to create an investment plan that will suit them. This is where AI can be very helpful, breaking down and personalising financial statements, reports, and other materials through on-demand and interactive tools and methods.
In fact, the WEF survey found that 42% of current investors would invest more in terms of money and frequency if an AI chatbot would assist them. Furthermore, 28% of investors already are using AI chatbots to help guide their financial decisions.
Is It So Simple?
AI can be beneficial when it comes to “very simple answers.” For instance, one can simply input what their monthly bills roughly total up to and ask the AI model to create a budget. That way, you know how much you can save in a specific month.
However, AI tools might fall short when it comes to much more complicated areas of investment such as tax optimization and advice about future investments taking into account the users’ risk profiles. With these topics, while AI could make for a good starting point, users and investors will benefit hugely from a financial advisor who could help them with personalised advice and navigate specific questions.
That’s not all. There are many concerns surrounding AI tools in terms of platform outages, data privacy, inaccuracies, model bias, and a lack of transparency. Another thing that one will need to remember is that when using any of the AI tools, one needs to be careful about putting specific financial and personal details into the software. Otherwise, it’s a huge data privacy issue, putting the information you’re feeding into the AI at risk.
Should I Take My Investments The AI Way?
The overarching question is: When it comes to creating a financial solution for yourself, will you really trust an AI tool to generate the final solution? We’re sure people would check and vet that very carefully, especially now that AI investment tools are still in their fledgling stage.
The bottom line is that AI is no longer the “future” of personal finance, because it’s already arrived, and is in the process of conquering, as we’ve seen. While some of these insights can be truly valuable, AI shouldn’t become your only resource. For those looking to primp up their portfolio with AI assistants, AI ETFs, or robo-advisors, remember this: AI can only assist with, and not supersede — nor replace — sound financial judgment.
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