Human vs robo adviser: what are the differences?

As Charles Stanley launches a real-life financial coaching service to complement advisory services, Rob Morgan asks whether robo advice and artificial intelligence can provide a realistic alternative.

| 6 min read

Do you trust a robot as much as a person? It probably depends on the context. A specific task requiring multiple precise calculations is most reliably carried out using computing power. However, when thoughts, feelings and uncertainties are involved the deeper understanding and empathy of a trusted individual is likely to be paramount. In today’s context, many people needing guidance around financial matters will now compare robo advice vs human advice, and which would benefit them the most.

The answer also hinges on what is at stake. It is one thing interrogating an Artificial Intelligence (AI) chatbot such as Chat GPT to investigate inconsequential matters or provide generic answers, but another to entrust it to make the potentially life changing decisions involved in personal financial planning.

The rise of AI and the robo ‘adviser’

Robo advice: a person using a chatbot service on their phone

ChatGPT has been a big hit since its launch last November. Powered by a ground-breaking artificial intelligence system trained on a vast amount of information gathered from the internet it can generate plausible-sounding responses to questions in almost any field. It can also create all kinds of content including articles, essays, poems, summaries of documents and even programming code.

This is just the start. Google has its own AI chatbot, Bard, and Microsoft is incorporating similar technology into its Bing internet search engine. Meanwhile Baidu, China’s main search engine, has its own chatbot, Ernie. These chatbots are becoming smarter through their interactions with humans, and the latest ChatGPT – GPT-4 – has reportedly passed the bar exam for trainee lawyers.

There is no doubt chatbots can be useful for seeking quick and convenient answers. Their ability to respond to questions like a human allows us to interact with technology in a more immersive and intelligent way. However, they have their limitations. For instance, on financial planning or investing questions, they can offer an overview on a subject, or some sensible basic tips, but dig deeper and they can sometimes present incorrect or out-of-date information. They can also omit relevant facts as the subject matter becomes niche or more personally relevant.

For instance, ask chat GPT “how should you invest” and it responds generically with the main points 1) set clear financial goals; 2) determine your risk tolerance; 3) diversify your portfolio; 4) consider your time horizon; and 5) educate yourself. All fair enough, but it is stumped when it comes to detail on certain rules and regulations, or it simply refuses to answer in case it might fall foul of the financial regulator.

To be fair, both Google and Open AI chatbots do consistently stress the importance of seeking professional advice to help make informed investment decisions. For instance, Chat GPT regularly presents warnings such as: “While I can provide general information and guidance, speaking to a financial advisor is often a valuable step when making important financial decisions.”

Take care with chatbot advice

Chatbots often give reasonable answers that can pass for specialist knowledge, but you shouldn’t take responses at face value, even though they can be disarmingly human. Ultimately, formal, personal advice, whether corporate, legal, financial, or in any other field, is the responsibility of a qualified professional who takes responsibility. That is not something AI can offer without a human to backstop it. As such it will always be restricted to offering broad brush answers to general questions, or else be carefully marshalled by an individual or business with the relevant expertise and definitive accountability.

You should also be wary of the information you feed into a chatbot. In particular, they are not an appropriate place to disclose personal information or anything you wish to keep confidential. Also keep in mind the potential for the aggregation of information you submit across multiple queries over time. Think carefully about the privacy terms of the service you use.

The true value of personal financial advice or guidance

Human financial adviser coaching a client on their finances

As a person you are unique, and so is your financial situation. That’s why a robo adviser vs a financial adviser presents a clear distinction: AI is no substitute for successful planning that fully considers individual circumstances, detailed financial position, and personal goals. The multiple factors, stakeholders and permutations of life means AI can make sense as a co-pilot to the financial adviser in certain tasks, but it cannot be the adviser.

With the benefit of experience, and asking more searching questions, a financial adviser can offer tailored, personal advice, which will differ depending on your age, circumstances, personal goals and the amount of risk you are happy with. AI also lacks the true personal touch, something that is very important to us at Charles Stanley. A real life conversation with a human being that explores deeper questions, challenges and feelings, alongside analysing your financial position, is the key to producing the right plan for you.

There is no ‘one size fits all’ when it comes to proper financial advice, and to reflect this we offer a range of advisory services where you can choose between comprehensive Financial Planning and our One Step Financial Plans which provide streamlined advice around a particular area for a one-off fee.

We have also recently launched Financial Coaching where you can gain clarity around your financial situation so you can take your next steps with confidence. We offer a free, no commitment, 15-minute call to discuss your needs with a (real life!) qualified financial planner, and you can then opt for a more in-depth video call at a fixed hourly fee of £150 should you wish. One of the key benefits of Financial Coaching is your specific questions will be answered by a human adviser, who is an expert in their field, so you can save and invest with added confidence, and avoid falling foul of common mistakes or misunderstandings. In a world where frustrating, often circular automated services are becoming the norm, we can offer the confidence you need from a fresh, professional pair of eyes on your finances.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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