A new survey from Nationwide Retirement Institute finds a startling number of American investors believe ChatGPT could provide better financial advice than a human advisor.
Findings show that 31% of survey respondents—including 37% of Gen Zers, 43% Millennials, and 19% Baby Boomers—expect that in the next five years, the technology will offer stronger financial advice than a financial advisor. Currently, 25% of investors surveyed said they trust financial advice provided by ChatGPT and other artificial intelligence (AI) chatbots.
Still, the survey shows that most participants either do not trust (43%) or are unsure (33%) whether they can rely on AI or not. Thirty-five percent disagree that ChatGPT will someday offer better financial advice, while 34% are unsure if it will.
Kristi Martin Rodriguez, leader of the Nationwide Retirement Institute, says the findings present an opportunity for financial advisors to engage with participants more, noting that human advisors have an emotional advantage to financial advice, unlike a chatbot.
“There are several factors unique to each individual’s financial portfolio that may not be factored into the responses that an AI engine might provide,” said Rodriguez in a statement to 401(k) Specialist. “The opportunity for the advisor is to focus on building a human/emotional connection with investors – particularly when they are feeling scared about their financial security. Good advisors know how to listen to clients and help them remain calm and confident about their financial plan.”
Instead, Rodriguez envisions a future where AI could become more of a “copilot” to help advisors provide a more efficient and personalized experience for their clients. “AI will likely become a valuable tool for advisors in the future and those who start to lean into learning about it now could have a competitive advantage when it becomes more widespread in the industry,” she added.
Preparing for a deep recession
Nationwide’s survey found investors are bracing for harsh market downturns in 2023 and 2024, and much graver than 2008’s Great Recession. Sixty-eight percent of respondents expect a recession within the next six months, and nearly 80% of those who do expect it to be severe. About two-thirds of investors believe a recession will be worse than the last one in 2008.
As consumers brace themselves for a recession, sentiment on the economy and their own financial strategy has weakened over the past year, finds Nationwide. Only 16% of consumers rate the U.S. economy as good or excellent in today’s market, an eight-point decline from September 2022, and about four in 10 gave a positive rating to their own personal finances, another eight-point decline from last year.
According to Nationwide, when it comes to managing their personal finances, investors are most concerned about inflation or rising living costs (59%), the cost of rent or housing (34%), lack of savings for unexpected or emergency expenses (32%), managing debt (31%); healthcare expenses (28%), and not being on track for retirement (18%).
Staying the course
To better prepare for inflation, 37% of investors have or are considering relying more on credit cards, 24% have or are contemplating reducing their retirement plan contributions, and 21% either have or are deliberating taking out a new loan. Fifty-seven percent of consumers have also used their savings in the past 12 months to pay for everyday expenses. This is especially true among Gen Z and Millennial consumers, at 64% and 66%, respectively.
In the event of a recession, investors’ top concerns include their ability to save in general (58%), their ability to save for retirement (52%), their retirement account losing value (52%), and their ability to retire on time (42%), says Nationwide.
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- Workers and Retirees Report First Dip in Retirement Confidence Since 2008 Recession: EBRI
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.