AI Failed a Retirement Income Literacy Test; Would You?

With the advent and continuing development of AI, there’s been a lot of talk and speculation in the media and financial community that AI will take over virtually (pardon the pun) every aspect of a financial advisor’s role and the functions and value they provide to clients. I disagree!
While AI will certainly enhance aspects of our profession and help us utilize technology to speed up things like decision making, I believe there will always be a need for the human element in financial planning. After all, AI is only as good as the data it has been programmed with or has availability to. This brings me to today’s topic.
Only 31% of pre-retirees and retirees demonstrate financial literacy concerning retirement income, as per a recent study by researchers Chet Bennetts and Eric Ludwig at the American College of Financial Services. However, Americans shouldn’t beat themselves up too bad, when the researchers posed the exact same questions to ChatGPT, it only scored 45%. Marginally better than the average American, but still failing.
ChatGPT has passed the bar exam, the CFA and the CPA exams and yet, having passed these very difficult exams, failed a basic retirement income literacy test. Bennetts, the program director at the college, expressed surprise at ChatGPT’s performance, speculating whether the questions they asked were too abstract for the AI or if financial decisions involve subjective nuances best managed by humans.
Intrigued, Bennetts and Ludwig conducted a follow-up experiment. They trained ChatGPT using textbooks used in courses for a Retirement Income Certified Professional (RICP) designation and retested it. This time, ChatGPT scored an impressive 92%, making significantly fewer errors. What was the difference? The human element that I mentioned earlier. The researchers found that when they used the training materials that advisors are
trained with to help guide client decisions, and the AI had access to that knowledge, it did great. Meaning, AI is only as good as the data it has to work with and that’s assuming that the data is being kept up to date in a fast evolving financial landscape day to day. Essentially, it means the financial advisor is very important because the advisor is able to ask the questions and clarify the answers of a client in a way AI alone can’t process. You know, the human element. The online survey of thousands of adults, aged 50 to 75, has been conducted every three years since 2014. Regardless of the respondent pool, the percentage of participants passing the test never rose above 50%, and that was for those with more than $1.5 million in assets. 40% of college grads passed while 38% of
retirees aged 70 to 75 passed, although only 33% of all retirees passed. Interestingly, while 36% of participants without an advisor and with more than $100,000 in assets passed the quiz, the pass percentage was only 37% for the same demographic with an advisor. This underscores the importance of having an advisor knowledgeable in all aspects of your retirement plan. The human element is only better if the human is…well, the better element. Designations like the CFP, ChFC and RICP are a good start as they are trained in many areas of the financial planning disciplines, including income.
Additionally, there were other areas in the study that underscored the importance of the presence of a competent fiduciary advisor versus a machine in the financial planning relationship. Primarily, that of reducing participants anxiety and stress in the relationship.
All of these aspects really point to the fact that advisors are not going to be replaced by machines any time soon. In fact, even if it happens one day, there will gaping holes in which the participant will never be able to fill apart from the human element. From retirement income knowledge to walking through volatile markets with our clients, advisors serve a role that AI is unlikely to ever replace.
I hope this is helpful to your retirement journey. Call us, come see us or visit us at www.woottonfinancial.com, we’d love the opportunity to help address your questions and concerns and provide you Clear Direction for Your Retirement®.

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