As ChatGPT approaches its third anniversary, a growing number of retail investors are turning to AI-powered chatbots for stock selection, fueling a boom in the robo-advisory market. However, even proponents of this technology caution that it’s a high-risk strategy and not yet a replacement for traditional financial advisors. Robo-advisors encompass companies providing automated, algorithm-driven financial advice, including fintech firms, banks, and wealth managers.
According to Research and Markets, the robo-advisory market is projected to surge from $61.75 billion last year to $470.91 billion in 2029, marking an approximate 600% increase. Jeremy Leung, a former UBS analyst, has been using ChatGPT to aid investment decisions since losing his job. He notes that while these tools can replicate workflows and offer investment analysis, they may miss crucial insights due to paywalls and limited data access.
About half of retail investors surveyed indicated they would consider using AI tools like ChatGPT or Google’s Gemini to manage their portfolios, with 13% already doing so, according to an eToro survey. However, ChatGPT itself warns against relying on it for professional financial advice. eToro’s UK managing director, Dan Moczulski, advises using AI platforms specifically trained to analyse markets, noting that general AI models can be unreliable.
While a hypothetical basket of stocks selected by ChatGPT in March 2023 outperformed the average of the UK’s top funds, experts caution that using AI for stock picking requires financial knowledge and carries significant risks. As markets continue to rise, there are concerns that investors using AI may not be prepared to manage potential losses during market downturns, highlighting the importance of risk management and informed decision-making.
