growtika-3wXVwtdaESA-unsplash
Picture of Prosperity

Prosperity

How will Artificial Intelligence impact finances and financial planning? Part Six – The new AI tools for investing

As we get ready for the release of OpenAI’s ChatGPT-5, it may be worth taking a moment to stare out the window and wonder what is about to be unleashed onto us.

If the hype is correct, the world is about to see something quite extraordinary, not so much another step as a leap.

By all accounts ChatGPT-5 will offer conversational ability, so the device will be able to converse with the user. It will seem human-like as it will be able to discuss aspects of how the user is interacting with it, and seek out, from enhanced datasets, much greater breadth in its data reach. Its modal abilities will be similarly greater, so that means it will be able to self-learn quicker and better, giving it a level of automaton never seen before (or not at scale anyway).

ChatGPT is a Large Language Model(LLM), but will have many of the features of an advanced Personal Assistant, blurring the lines between these different models, and bringing to the fore the “all-rounder” aspect that would seem to be arising with much of this advanced AI-tech.

Put another way, once a certain level of intelligence is reached, these general purpose programmes will have incredible adaptability.

In relation to investing, will they have a role to play? Or will more bespoke and specific tools be introduced?

The answer is likely to be yes to both.

The nature of the LLM or Personal Assistant (and more of these are developing rapidly, so it is far from just this one leading product) is that they offer the most flexible, intelligent, companion you could ever imagine having!

If you are thinking about your investment portfolio and wondering if you can eke out more from it, getting a better performance for no more risk, then you might discuss with it, how? It can then come up with information, research, ideas, suggestions and more.

Based on its current accuracy (estimated at 88%), you might be cautious, but one of the most progressive elements of this developing world is that the AI is getting much greater accuracy each year, and becoming more reliable and authentic. So, as usual we have to compare to alternatives, and once this gets close to 100%, it will be – arguably – better than a human, however knowledgeable and expert.

The point is we are moving from factual analysis and reporting to discussion and exploration, and no human will be able to compete with the reach and the analytical processing power of these machines, and their ability to sift.

In relation to specific investment tools, they are beginning to appear. Examples include ones that provide investment advice, another that produces sentiment analysis, a portfolio builder and manager, and a risk management tool.

Some of these are built upon ChatGPT’s interface and intelligence, some are more bespoke.

One key aspect will be integration, so one of the most breathtaking things we need to consider, is that many AI devices, tools and programmes will collaborate, so using each other’s learning ability and experience, memory and results to inform the other.

We know that self-driving cars will in the future “talk” to each other as they drive around, sharing real time updates, so as to co-ordinate the driving efficiency. Something similar will happen here.

It is very difficult to judge or predict how the aggregation will work in investing terms, as we are investors together riding a wave of sorts, we cannot all get 20% per year returns, in a market that aggregates at a 6% per year average return.

The marginal benefits of AI to each of us is more likely to come from management efficiency and reduced costs, and much more in tune with personalised mapping. This means we can become better at sorting ourselves from our specific needs, rather than playing along generally with the overall market movement.

If AI is capable of getting beyond regulation and has limited moral considerations, then there could even be new risks to think about, as we know from more than one James Bond film, that there is ridiculous wealth to be made by individuals from plunging a market into decline, thanks to forward selling facilities. If the general population is investing for gains, then the counter-party can only really make serious money by forcing the position in the other direction.

Therefore, committed groups, armed with sophisticated AI hacks, could run rampage through markets, something we have seen a little glimpse of in the past couple of years, with the Robinhood platform.

The so-called little guys can take on the investment giants (that run the funds that most investors use in their portfolios), forcing co-ordinated and sophisticated price movements against them.

If this is the case “stop/loss” investing tools could become invaluable, as a form of insurance against what will inevitably be an unprecedented market situation.

Automation has been in the major markets for decades, but not with high intelligence attached to it, that’s what about to change.

If there is one new thing to explore early on, it is how to build in added protection and to seek out methods and tools that come along to support this.

Share this post

Request a document to sign.