Gen Z's Shift Towards AI for Investing
Younger investors, particularly those from Generation Z, are increasingly turning to artificial intelligence (AI) for investment advice. A study by BMO Financial Group reveals that 61% of Gen Z members prefer AI over traditional financial advisors. This trend underlines the growing reliance on technology by this tech-savvy age group.
Balancing Science and Art in Finance
While AI provides accurate data analysis, it lacks the human touch necessary for emotional decision-making. Shane Stewart, a certified financial planner at Deseret Mutual Benefit Administrators, emphasizes that financial decisions are not just scientific but also artistic. The art lies in managing emotions during fluctuating market conditions. For instance, during market highs, overconfidence can lead to poor decisions—an area where human insight is invaluable.
The Tech-Savvy Nature of Gen Z
Stewart observes that Gen Z is less dependent on human advisors initially. However, as financial responsibilities increase with age, individuals often seek professional guidance. Just like previous generations, as their financial portfolios grow, the need for expert advice becomes evident.
When to Seek Human Advisors
Advisors play a crucial role, especially during economic downturns. Stewart advises that while AI tools can suffice in stable or rising markets, during downturns, the human touch offers significant benefits. Advisors act as objective third parties helping investors stick to their strategies amidst emotional turmoil.
Caution with Unverified Sources
In today's digital age, information is abundant, yet not all sources are reliable. Stewart warns about the risks of taking advice from unverified sources like TikTok. For example, someone might provide financial tips without proper credentials, misleading many.
AI and Human Experts: A Complementary Approach
While AI offers a powerful tool for data analysis and forecasting, it should complement rather than replace human expertise. Stewart likens AI in finance to using Web-MD for medical self-diagnosis; despite initial insights, professional medical advice is essential for treatment. Similarly, AI can guide investments, but human advisors provide the nuanced perspective crucial for successful financial planning.
