02 Mar 2023 Chatting With ChatGPT About My Money Questions
I do not officially have a financial advisor (cobbler’s children’s shoes and all that, plus I am surrounded by great ones here who humor me), but if I did, I suppose the questions that I’d be asking her would tend toward these:
- How can we raise our rich kids so that they aren’t “rich kids”?
- Help us navigate the tension and uncertainty between the valuable compounding of our saving now in our mid-30s vs. the much higher free cash flow we will likely have available to save when in our 50s and 60s.
- How should we think about the value of the business I partially own when it comes to planning for retirement?
- As wealthy Christians, how much money should we give to the poor? How should we balance and integrate the time we spend in work, leisure, and service to others?
Maybe all of these aren’t even questions for a financial advisor, I don’t know. Perhaps some belong more in the purview of therapists or priests. But these are my money questions—the ones that sometimes literally keep me up at night—and I have gotten similar enough queries from clients to feel that perhaps a financial advisor ought to be able to speak to these sorts of “values-dense” questions with a certain amount of wisdom and care.
In the absence of a financial advisor, I asked ChatGPT—the large language model-based artificial intelligence bot that has been dominating certain headlines recently—about some of my pressing questions.
Jared: How should I think about the equity in my business in terms of its possible appreciation over time, its lack of liquidity, and ultimately planning around its value during retirement?
ChatGPT: If you are a business owner, the equity in your business is likely a significant part of your net worth and financial future. When it comes to thinking about the equity in your business, there are a few key factors to consider:
- Appreciation over time: The value of your business may appreciate over time as the company grows, increases revenue, and becomes more profitable. This appreciation can be a significant source of wealth and can help you achieve your financial goals.
- Lack of liquidity: Unlike publicly traded stocks, the equity in a privately held business is not easily bought or sold. This lack of liquidity can make it difficult to access the value of your business when you need it, such as during retirement or other major life events.
- Planning for retirement: When planning for retirement, it’s important to consider the value of your business and how it fits into your overall financial plan. Depending on your goals and circumstances, you may want to consider selling your business, transferring ownership to family members or employees, or using the equity in your business as collateral for a loan or other financing.
To address these factors, it’s important to have a clear understanding of the value of your business and to regularly review and update your financial plan. This may involve working with a financial advisor, accountant, or business valuation expert to determine the value of your business and develop a plan for how to manage and utilize the equity in your business over time.
It’s also important to have a contingency plan in place in case of unexpected events such as illness, disability, or death. This may involve having a buy-sell agreement in place or other succession planning strategies to ensure that your business can continue to operate and provide for your family and employees in the event of an unforeseen circumstance.
Jared: Due to the factors you described above, should I include the current value of the business in my financial plan with conservative factors, or would it be better not to include it at all given the amount of time between now and a possible exit and all of the uncertainty that long timeline entails?
ChatGPT: The decision of whether to include the current value of your business in your financial plan will depend on a number of factors, including your personal financial goals, the current value of the business, and the level of uncertainty around a possible exit.
Including the current value of your business in your financial plan can give you a more accurate picture of your overall net worth and help you determine whether you are on track to meet your financial goals. However, it’s important to be conservative in your assumptions and take into account the lack of liquidity and potential uncertainty around a possible exit. This may involve using a lower valuation for your business, factoring in potential tax implications, and being prepared for the possibility that the value of your business may fluctuate over time.
On the other hand, if the level of uncertainty around a possible exit is high or if you are uncomfortable including the value of your business in your financial plan, you may choose to exclude it altogether. This may be the case if you are still in the early stages of building your business and there is a lot of uncertainty around its future growth and profitability.
Ultimately, the decision of whether to include the current value of your business in your financial plan will depend on your individual circumstances and goals. It may be helpful to consult with a financial advisor or other trusted professional to help you make the best decision for your situation.
How about a different one?
Jared: As a wealthy Christian, how much money should I be giving to the poor?
ChatGPT: As an AI language model, I cannot provide personal financial or religious advice. However, I can share some general guidelines on charitable giving that may be helpful.
In Christianity, the concept of tithing, or giving a percentage of one’s income to the church or other charitable organizations, is often practiced. The Bible suggests giving 10% of one’s income, but this is not a hard and fast rule and some people may choose to give more or less depending on their circumstances.
When it comes to giving to the poor, there is no set percentage or amount that one should give. However, the Bible encourages generosity and helping those in need, and many Christians choose to give a portion of their income to charitable organizations that support the poor and marginalized.
Ultimately, the decision on how much to give to the poor is a personal one and will depend on factors such as your financial situation, priorities, and charitable goals. It may be helpful to prayerfully consider your giving and seek guidance from trusted religious leaders or financial advisors. Additionally, you may want to research and evaluate different charitable organizations to ensure that your donations are being used effectively and efficiently.
As you can see, ChatGPT has done an admirable job of coherently restating and fleshing out the problems here—which can be a useful thing!—but it is also continually falling back on this “consult your financial advisor or other trusted professional” language, and that is because ChatGPT is not designed to give advice. With very specific prompts and some cajoling you can trick it into doing so with varying degrees of success, but that is not its intended use, and it is quick to say so. I wish more humans in the broader financial services industry would be as forthright about their own limitations in giving good advice…
As I have used ChatGPT personally for the last few months, I am reminded of the magical set of burgundy encyclopedias in my childhood home. There is a sense of wonder that, with a bit of curiosity, you can access an unimaginable trove of information in a way that is easily approachable and yet densely rich.
But in going through the exercise of asking ChatGPT about my most important money questions, I realized yet again that the value of an advisor—whether financial or otherwise—is not merely in the answering of factual questions, or in the fleshing out of a given problem. When we need advice, we often do not even know the questions to ask, or we may know some of them while being blind to several others we should be asking. The better you get at writing prompts in ChatGPT, the better output you get from the tool, but when life happens and we are faced with financial challenges, what we need is not simply a person of whom we can ask questions, but a person who will ask us questions, and then deliver meaningful advice with wisdom and care.
I am excited about the technology underpinning ChatGPT, as I am sure it will, over time, help good financial advisors become better financial advisors, leveraging their time to cultivate the irreducibly human component of advice. I should probably hire one!