A surprising outcome happens when you use artificial-intelligence tools to help with investing decisions.
Let me demonstrate with the answer to a request I recently posed to Google’s Gemini AI tool: “I am a 35-year-old Canadian who wants a list of the best Canadian equity ETFs to buy for long-term investing.”
Four exchange-traded funds were mentioned in the results. My own scoring of these ETFs: A+ on one, A- and C+ on another and a D on the remaining one. But the varying quality of these results isn’t the issue. Rather, it’s the boilerplate attached at the end of Gemini’s response: “It’s important to do your own research or consult with a financial adviser before making any investment decisions.”
I’ve seen this line or something similar in almost every financial question I’ve submitted to AI tools. AI developers, you have to do better than this patronizing, legal butt-covering.
First off, using AI is research. Everyone gets that AI alone isn’t a definitive answer – there’s no need to belabour that point. As to consulting a financial adviser, that’s a joke. The list of advisers standing by to offer a second opinion to people using AI for investing questions has zero names. The adviser business model doesn’t work that way.
The closest thing the average investor can get to on-the-spot access to an adviser is a sales person in a bank branch. You know how these conversations go. “You can have anything you want as long as it’s in our universe of unbelievably lucrative – for us – mutual funds. Or, maybe an index-linked guaranteed investment certificate is what you want.”
The irony of AI referring people to an adviser is the way it hearkens back to the investing world of 30 years ago, when DIY options were limited. Back then, almost everything in investing was filtered through advisers – or brokers, as they were commonly known. DIY investing was an almost eccentric thing to do back then.
DIY investing reached new heights in the 2020s as a result of zero-commission trading, the rise of mobile apps, the availability of fractional stock and ETF investing and noteworthy improvements by many digital brokers. AI is part of this trend, but it loses credibility by telling people to talk to advisers. That is so 1994.
Now for the four ETFs suggested by Gemini, with letter grades that reflect how well they answered the question:
Broad market ETFs
- iShares Core S&P/TSX 60 Index ETF (XIU-T): Give this one an A-. Good, but you could do better. See below.
- Vanguard FTSE Canada All Cap Index ETF (VCN-T): A+. Cheaper and more diversified than XIC.
Sector-specific ETFs
- iShares S&P/TSX Capped Financials Index ETF (XFN-T): D. Any broad market Canadian equity ETF likely has at least one-third of its assets in financials. You don’t need more.
- Vanguard FTSE Canada All Cap REIT Index ETF (VRE-T): C+. Real estate is a small slice of the broad Canadian stock market, so adding exposure to real estate investment trusts can make sense.