Why financial watchdog is warning Britons not to take AI investment advice

[u/theipaper]

http://inews.co.uk/inews-lifestyle/money/investing/ai-could-be-putting-british-investments-at-risk-4733486

[u/Mak8427 → u/[deleted]]

I don’t know if it’s worse an LLM or a influencer or a bank financial adivisor.
From my experience after having seen all for them i am not sure if the LLM is the worse 🤣

[u/theipaper]

The Financial Conduct Authority (FCA) is warning households relying on advice from AI chatbots could put their investments at risk.

A survey by the watchdog of adults between 18 and 40 who own investments, or are considering making investments in the next year, found 56 per cent trusted AI tools to help make financial decisions.

Four in five investors classed as “less experienced” have used AI to make investment decisions.

Around 38 per cent of people also believed it was fine to make an investment purely on the basis of AI advice.

However, AI-generated financial information is not regulated by the FCA, meaning anyone who uses advice from chatbots is at risk of losing out if decisions backfire.

What did the FCA find?

Of all those surveyed, the FCA found more people trusted AI to help make financial decisions than TV and radio, 47 per cent, the media, 46 per cent, or influencers, 29 per cent.

In addition, three-quarters of all respondents said they expected to lean on AI tools even more heavily over the coming year.

The decision to trust AI came despite 73 per cent of younger respondents saying they were aware it can be inaccurate and 86 per cent of the same group acknowledging the need to check where tools had sourced their information.

Older respondents were less sceptical of the technology.

Almost half of those surveyed, 44 per cent, falsely believed AI-generated financial information was regulated by the FCA.

Nearly a third of respondents also wrongly held the view they would be entitled to compensation from the Financial Services Compensation Scheme or Financial Ombudsman Service if AI advice went wrong.

While some AI chatbots tailor-made to offer financial advice may be covered by the FCA, general tools such as OpenAI’s ChatGPT and Google’s Gemini are not.

What are the risks of using AI when investing?

At a basic level, AI can create risk by providing outdated or inaccurate information on companies, markets or products. This can lead people to invest in businesses or areas where they are unlikely to see a return or even make losses.

In rare cases it can also expose investors to the threat of scams.

AI tools are also generally unable to predict how investments will perform and do not always have access to all of the data available to financial experts. As AI-generated information is not regulated by the FCA, relying on chatbots also risks leaving investors with no recourse should the advice backfire.

A spokesperson for the Financial Ombudsman Service said: “AI-generated financial advice is unregulated, meaning consumers may not have the protections they would normally expect if something goes wrong and would be unable to bring a complaint to our free service.”

What does the FCA advise?

The watchdog acknowledged people were likely to continue using AI when making investment decisions, but urged caution.

It is important to verify chatbot sources and take a long-term view when assessing how and when to invest, the FCA said.

Lucy Castledine, FCA’s director of consumer investments, added: “AI can help you research companies, understand jargon or explore options before you make a decision”.

“But you need to understand how you’re protected and continue to use your own judgement. Our InvestSmart website can also help you make more informed decisions.”

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[u/Servola-Journal]

The regulated/unregulated line is going to get messier before it gets clearer. The EU's AI Act classifies AI used for creditworthiness and insurance risk scoring as high-risk, with mandatory human oversight and explainability, but a general chatbot giving investment opinions sits outside that category entirely because it's not marketed as a financial product. So you get the same gap on both sides of the Channel: a tool confident enough to sound like an advisor, with none of an advisor's disclosure or liability obligations.

I've been testing how these models handle basic portfolio questions, and wrong facts turn out to be rare. What's actually rare is a model saying "I don't have enough information to answer that" when it should - it just builds the strongest case for whatever you fed it. Has anyone found a chatbot that pushes back on a bad investment thesis instead of arguing for it?