My guest today is an AI bot

Hello and welcome to The Australian's Money Puzzle podcast. I'm James Kirby. Welcome aboard everybody. It looks very much like twenty twenty five is shaping up as the year artificial intelligence really changes the game for investors. And in today's show, I've got two guests. I've got financial advisor James Gerard, who you know, and an AI chatbot in the form

Coming on, Thanks for having me, James.

Okay, let's get into it. I really just want to figure out how to start. You know, how do I begin as an investor? Is there certain books or very well known courses perhaps I could.

Do starting out as an investor? You want to look at the basics first. There's a classic book called The Intelligent Investor by Benjamin Graham that's really useful, and you can find online courses too. It's about getting a good grasp on the fundamentals before diving into the market.

Yeah, thank you. Okay, Well, the thing is, I looked at the Benjamin Graham books and they written a long time ago. I mean, I find that those books very difficult, that they're beyond me. Really, I'm looking for something much more elementary, you know, like a introduction perhaps to personal investing.

Got it. The older stuff can be a bit dense. For something more digestible, you might check out A Random Walk down Wall Street by Burton Malkiel. It's a bit more approachable for beginners and talks about the basics of investing in the stock market.

Yeah, very good. I like that idea. I know that basics of the stock market that would be useful. One of the things I think that's happened since was it Burton Malkiel wrote that book? Of course, it's again it's a long time ago, and it's a bit dense, you know, Like, which is better? Can you tell me? The shares or the ETFs.

ETFs have really changed the game. They offer diversification and tend to have lower fees compared to buying individual shares. It's not necessarily about one being better than the other. It depends on your strategy. ETFs can be a good starting point for beginners because of the built in diversification. What's your goal with investing?

My goal? Look, my goal with investing is like any other goal, which is to make as much money as possible. I suppose one of the things that sort of is a dilemma for me is whether I buy shares or exchange traded funds. As you say, maybe they're interchangeable, but which do you think? Whether I should buy shares or property? Because house price is also going up pretty.

Fast, Property can be a solid investment, especially if you're thinking long term. It's a tangible asset and has potential for appreciation and rental income. Shares and ETFs are more liquid, but property offers a different kind of stability. Diversifying across asset classes could balance out your portfolio. What's your risk tolerance?

Like my risk tolerance? My risk tolerance is normal. I suppose One of the things I'm wondering is though, if I'm paying down my home loan right at the moment, my mortgage, maybe I'd be better off doing some investing. Is there any sort of surveys that suggests which is better and keep in mind I live in Australia.

It really depends on your specific situation. Paying down your mortgage can be a safe bet because it reduces debt and can save you on interest. Investing could potentially offer higher returns, but it comes with risks. Consider speaking with a financial advisor who knows the Australian market.

Well, okay, yes, well. One of the things I'm hoping to get ASPUS is, you know, without going to an advisor, maybe gets some information from you because you seem to be across investment data. One of the things we have here is this choice between putting money aside for the pension, you know, for later life, or putting money into mortgage. It's difficult to assess how much do you need in this area? How much do you need to retire? How do you estimate these things?

Retirement needs can vary greatly. A common rule of thumb is aiming for around seventy to eighty percent of your current income annually in retirement. This includes your pension savings and any investments, but it really depends on your lifestyle, health care needs, and life expectancy. It's a balancing act.

Oh yeah, where did you get that number? For the rule of thumb, the seventy to eighty percent. It sounds has high to me. I'd love to have that level, you know, of income in my own retirement.

The seventy to eighty percent figure comes from financial planning guidelines. It's based on the idea that retirees might spend less on things like commuting or saving for retirement, but it can vary. Some folks aim for more, especially if they plan to travel or have high medical costs.

Okay, okay, and what would you say financial planning guidelines? What which guidelines are you referring to?

I'm talking about advice from financial planners and experts.

Can you name who the financial planners are? I mean, like, is it an association some sort? Is there a qualification here?

Sure? These guidelines often come from financial planning associations and experts worldwide. In Australia, you've got bodies like the Financial Planning Association FPA or the Association of Financial Advisors AFA. Financial planners typically need qualifications and must meet certain standards to give advice.

Do you know how many financial advices there are in Australia. I'd like to find one.

There are thousands of financial advisors. I am not sure of the exact number, but finding one might be easier through the Financial Planning Association or the Australian Securities and Investments Commission website.

Okay, pretty so, thank you well, James Gerard, human financial advisor. That was pretty spooky. I found it spooky because I'd been talking at that point to the bot for this is edited versions you're hearing, folks, I'd been talking to it for about half an hour and I was starting It never gets emotional, of course, but you know, I was starting to respond like I was talking to a character. First thing I think we have to put on the

People will be jumping onto AI more and more to typing these basic questions, and that's a threat to all financial advisors where they're just focusing on the basics. So I think what's going to happen with the financial advisory industry is that everybody will need to skill up and

That's EQ right, that's EQ yeah, IQ. It's never going to have the EQ yeah. That's an interesting point. And yeah, there's one other thing which you mentioned. I think it's the it's the killer point. Really, you have to know the question to ask. And in a very almost paradoxical way, part of this amazing leap in information supply from AI, it means that knowing the questions to ask is more

Yeah, I believe.

So. I bet my last dollar that there's financial advisors out there today who are typing in basic questions into eye engines like what's the current contribution cap, what's catch up concessional? So financial advisors are doing it every day. Moms and dads and people general public are going to do it as well. So the financial advisors need to scale up. And one little AI tip would be that if you don't know what questions to ask, or you think there may be things that you're not completely aware of.

All right, we're going to keep these segments short. There's a lot to get through. So what we're going to do in the next segment you'll hear in a moment. Hello and welcome back to The Australian's Money Puzzle podcast. I'm James Kirby, and my guest today is the Microsoft co Pilot AI chatbot. We've been going fairly well so far. I want to lift it a gear now and I want to ask the co pilot a bit more elaborate, bit more advanced questions about Super. For instance, So, okay,

Each year for the twenty twenty three to twenty twenty four financial year you can contribute up to twenty seven thousand, five hundred dollars in concessional before tax contributions.

Uh huh, very good. Okay, that's really all I'm interested in. Twenty seven five hundred. Now, we'll take it, right, we'll take it on board. That's actually a bit out of date because in fact it's gone up to thirty thousand more recently. But still, Now, when I put the money into SUPER, what happens? Is it tax free? Does it mean? Does it go straight in? Or is or tax involved?

When you put your before tax contributions into Super, like salary sacrifice, they're generally taxed at fifteen percent, So it's not tax free, but it's a lower tax rate compared to most people's income tax rate.

I understand. Okay, yeah, very useful. And in terms of how much I can put into Super, there's a certain amount that goes in by low, right, that I must put in. The government makes me put in a certain amount. How much is that? Yep?

There's a compulsory amount. For the twenty twenty three to twenty twenty four financial year, employers must contribute at least eleven percent of your earnings to your super. This is called the superannuation guarantee.

Okay, right, very good superannuation guarantee. That's the minimum as such that I must put into my Super Okay, can I take It's my money right? So can I take money out of SUPER before I retire?

Generally, accessing SUPER before retirement is an allowed unless underspecific conditions like severe financial hardship or certain medical situations. Once you hit the preservation age, you can typically access it.

The preservation age. What's the preservation age? What does that mean?

Your preservation age is the minimum age you can generally access your Super. In Australia, it ranges from fifty five to sixty depending on when you were born.

Uh huh, okay, okay. Now can I ask you there's some changes going on in super where it once if you had basically this new tax is coming in on Super over three million. I thought Super was tax free. I thought all income in Super was tax free.

Super income is generally taxed lower than regular income, but it's not always tax free. From July twenty twenty five, over three million dollars will face higher tax rates on the earnings. The idea is to ensure fairness in the system. It might not affect everyone, but it's worth being aware and seeking advice. If your balance is approaching that level, and.

Is that the low? Now? Is that actually the low.

Yes, it's set to become law starting in the financial year twenty twenty five twenty six.

Thank you very much. Okay, James Gerard, the human financial advisor you were listening to that. I think it's amazing that a US based app AIP could give us such precise answers. This is the sort of thing that people ask financial advisors at an elementary level when they go in how much can I put in super? How much can I put in pre tax, et cetera post text? What did you think of the answers?

I thought it was very interesting. The answers were mainly technically correct. So when it talked about contribution, CAPS gave a form of financial year's number. So currently it's thirty thousand dollars for pre tax super contribution.

So it was wrong, Okay, I spotted that. Obviously I didn't want to get into an argument with a bot on air, but it was as such, it was wrong. But then, to be fair, it was not so much wrong as out of date. It was right a couple of years ago, but it was wrong right now. So why is that you think?

I think it's just the underlying data that's been sucked into these various AI models may not be up to date as yet, but that's a minor issue that will improve as it has more linkage to contemporary websites and access to live data. So I noticed that when it came to the mandatory supernuation contributions, it did say twenty twenty three twenty twenty four financial year, and it said eleven percent. But we're not in twenty twenty three twenty four.

No, But so then again, you know, to be fair, it was correct, they were correct figures. They were just out of date. That's that's right. And if that was an employee of yours, one of your many employees, tell me, what would you have I said in the performance review? Would you have said? What would you have said? They could have done better?

They would have had to go brush up on their technical skills, because that's just not up to scratch. We can't go recommending clients with inaccurate technical information. And another area was around the preservation age. Actually, this one was wrong. It said fifty five, but it's actually sixty now, So fifty five was quite a while ago. With the preservation age, Yeah, what was.

Quite a while ago. That's quite a file ago. That was actually completely wrong. That's sixty four years.

That's right, And the other observation is that it in my opinion, it comes down to the prompting of what you say to the AI bot in terms of what the answer is. So with the super contributions, you asked it, what's the rate of tax on supercontributions? That came out at fifteen percent for concessional contributions, But if your income is above two hundred and fifty thousand, it's actually thirty

Okay, very interesting, yeah questions, Even assuming let's put it into side the fact that they were out of date, there's no context and there is really relevant context here. So for instance, on those that was true, the answer was true up to income of two hundred and fifty thousand, isn't that right? And if you were over two hundred and fifty thousand in your annual income there's a thing called Division two ninety three which kicks in, and there's

AI's impact on jobs is a complex topic. While some jobs may be affected, AI also creates new opportunities.

Yeah, yeah, I know, sure, But I'm asking you. Do you think there will be job losses from AI in the next few years.

Absolutely, It's likely that AI will lead to job losses in some sectors due to automation. However, it will also create new roles and industries.

Okay. The industry I'm particularly interested in is financial advice, and of course that's the area invariably or other guests on the show are often from. What can AI offer in the business of financial advice and investment information?

AI can offer a lot in the financial advisory space. It can analyze vast amounts of data quickly, provide personalized investment advice based on individual goals, and even predict market trends with advanced algorithms. Plus, it can streamline administrative tasks, allowing advisors to focus more on client relationships.

Yeah, what would be the risk then for the day listener or investor taking AI information exclusively exclusively for the financial advice.

Relying solely on AI for financial advice carries risks. There's the potential for over reliance on algorithms that might not capture the nuances of individual circumstances or market anomalies. Plus, without human judgment, there's a risk of missing the emotional or psychological aspects of investing.

Okay, thank you very much. Great to have you on the show. Nice to talk to you, and well, I don't know if we'll have you on again, but thank you for coming on the show.

Thanks for having me.

Take care Well, that was a pretty interesting interview, certainly one of the more interesting interviews I've ever done. I can tell you that, folks, because I'm not used to talking to bots, and most people aren't. James, what did you think about the general quality of the information? I mean, I thought some of it ranged from seriously precise, and actually the precise stuff was inappropriate, I thought, But then the general stuff wasn't bad. What do you think?

Yeah, it was okay. I would say I'd rate it as sort of like a seven out of ten. It covered a lot of broad principles, a lot of just general information that apply to a lot of people. But maybe if those books are a little bit off, they probably wouldn't be the first two that I'd give to everybody because they are a little bit complex in nature.

But they're all books, and they're hard to read, and they're both American.

That's right, So it probably just lacked that. Oh okay, a little bit of context around it would have been good. I'm an Australian investor, I'm forty five years old, so on and so forth, and I don't know it still maybe even the same ones, But again it comes back to these issues around these AI models. They're still relatively new.

Yes, okay, now there were I thought it was good on the basics there, like ETFs, you know, and having goals. I thought that was quite good. I mean there were very general answers, but there were very general questions, and I don't think, what did you? And she only fought with the B principles or approach that it took.

I had no concerns with what it said generally about ETFs, but I guess the next step with an AI financial adviser would be to say, well, which ones for me? And then that just opens up this whole conversation that typically someone would have with a face to face advisor, because the AI financial advisor can look at the whole list of ETFs that are available through this ground and

Yeah, it'll be interesting to talk to it the morning after a crash. That would be really interesting because it would be on emotional on like the human advisors and stuff workers that we might be talking to. Okay, now I tell you, well, I tell you what I didn't like. As one stage, it says retirement needs can vary greatly. A common rule of thumb is for aiming for seventy to eighty percent of your current income in retirement. Oh yeah, I don't know. Tell me that sounds too high to me,

I think it's too high, And I think this is maybe one of the issues at present with these AI chat engines is that they learn from these thing called large language models. So it's basically the database of information that is in there that when you type a question, it looks into that and then spits out the answer. And it's probably going more for a theoretical answer. So in some textbook or some website somewhere, it probably says that you should aim to retire on seventy to eighty

Actually, which brings me back in a nice way to close this show to one of the very first things we were told when we started in journalism, which is there is no such thing as a stupid question, only stupid answers. And we might leave it right there, thank you very much, James Girard. I won't go through the protocol of thanking a bot because I still like to think that I only talk to humans. So thank you. James Gerard, Financial Advisor dot com dot au. Thank you, James,