Gen Z Slang Meets Investment Advice: The Rise of AI-Driven Financial Guidance

In the rapidly evolving world of finance, one startup is making waves by offering investment advice in a language that resonates with the youngest generation of investors: Gen Z slang. Arta Finance, a wealth-management startup led by an ex-Google executive and backed by the former chief executive of Swiss-banking stalwart UBS, is rolling out an AI assistant that can dispense financial advice in spoken conversations—and in any preferred tone and argot. This innovative approach is designed to make financial advice more relatable and engaging for the 20-something millionaire set, who are increasingly turning to digital platforms for financial guidance.

The use of Gen Z slang in investment advice is not just a gimmick; it's a strategic move to bridge the gap between traditional financial jargon and the language that young investors are familiar with. According to a survey from Insurify based on Pew Research data, 41% of Gen Z investors (ages 22-27) consult their parents and other family members for financial advice, making family the go-to source for financial advice among the young. This indicates that young investors are seeking advice from sources they trust and understand. By using Gen Z slang, financial advisors can make their advice more accessible and easier to understand, helping young investors to better grasp financial concepts and make informed investment decisions.

Moreover, the use of Gen Z slang in investment advice can help improve financial education and inclusion. A Swiss Financial Institute study of 29,000 TikTok accounts revealed that 28% of finfluencers were skilled, generating 2.6% monthly abnormal returns. However, 56% of finfluencers were classified as anti-skilled, generating -2.3% monthly abnormal returns. This highlights the importance of providing accurate and reliable financial advice to young investors, who may be influenced by finfluencers on social media platforms. By using Gen Z slang, financial advisors can make their advice more engaging and relatable, helping young investors to critically evaluate information and the motivations and qualifications of finfluencers.

However, the use of AI-driven financial advice tailored to Gen Z preferences and communication styles presents both potential risks and benefits. One of the key benefits is the ability to engage young investors in a more relatable and accessible manner. For instance, Arta Finance, a wealth-management startup, is using mobile apps and AI tools to reach young millionaires, offering financial advice in spoken conversations and in any preferred tone and argot, including Gen Z slang. This approach can make financial advice more approachable and understandable for this demographic, who are often more comfortable with digital communication and informal language.

However, there are also significant risks associated with this approach. One major concern is the potential for misinformation or poor advice. A Swiss Financial Institute study of 29,000 TikTok accounts revealed that 28% of finfluencers were skilled, generating 2.6% monthly abnormal returns. Meanwhile, 16% were unskilled, offering advice that provides neither gains nor losses. Worse still, 56% of finfluencers were classified as anti-skilled, generating -2.3% monthly abnormal returns, meaning listening to them is worse than receiving no advice at all. This highlights the risk that AI-driven advice, if not carefully curated and regulated, could lead to financial losses for users.

Another risk is the potential for over-reliance on AI, which could lead to a lack of critical thinking and financial literacy among users. As noted, "Gen Z doesn’t lack confidence when it comes to spending and saving, however. Forty-five percent of those polled claim to have advanced knowledge of spending, while 42% said the same about saving." However, this confidence does not necessarily translate to a deep understanding of financial management basics like paying taxes and borrowing/managing debt, where nearly one-third feel they have just a beginner's knowledge. Therefore, while AI can provide immediate and accessible advice, it may not foster the long-term financial literacy and independence that is crucial for sustainable financial health.

In summary, while AI-driven financial advice tailored to Gen Z preferences can make financial advice more accessible and engaging, it also poses risks related to the quality of advice and the potential for over-reliance on technology, which could hinder the development of critical financial skills. As the financial industry continues to evolve, it will be crucial for startups like Arta Finance to strike a balance between innovation and responsibility, ensuring that young investors receive accurate, reliable, and actionable financial advice.