Nearly half of those that use artificial intelligence (AI) to support their investment activity “mistakenly” believe the information it generates is regulated.
Investors using investment tips from general purpose AI are not protected against losses that result in bad advice.
This figure, according to research of 18 to 40-year-olds from UK financial services regulator the Financial Conduct Authority (FCA), comes as two-thirds of investors look set to increasingly “lean on” AI for support with their decisions.
The FCA found that 80% of 666 investors surveyed now use AI, but it warned that these investors may be misunderstanding the level of protection they have.
“Unlike regulated financial advice, AI-generated tips from general-purpose chatbots mean you are not covered if things go wrong,” it said. “This differs from a tool deployed specifically to provide financial advice, which would be likely to fall within our remit.”
As well as 44% wrongly presuming AI-generated financial information is regulated, around a third believe they would get compensation from the Financial Services Compensation Scheme (FSCS) or Financial Ombudsman Service if AI advice went wrong.
Three-quarters (73%) understand AI can provide inaccurate information, and 86% know they need to check the sources referenced when using AI.
Despite this knowledge, and in light of a misconception that they are protected, a total of 38% still believe it’s fine to make an investment decision based solely on the outputs of AI.
The FCA stressed: “General purpose AI chatbots are not regulated, although tools which are specifically set up to provide financial advice would be likely to fall within the FCA’s remit.”
Lucy Castledine, director of consumer investments at the FCA, said: “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.”
Unregulated reliance
Technology is increasingly relied on by amateur investors at great risk to their finances. For example, recent research from TSB found an average of £3,000 was lost by people as a result of financial investment fraud via social media platforms, which is also unregulated.
The findings also revealed serious financial harm caused to over half of people who followed financial advice from social media platforms, with 56% losing an average of £700.
The survey found that the 25-34 age group were most likely to act on financial advice on social media and to use AI for advice. Half of this group have done so in the past year, with 27% using it for advice on savings and 18% for investments.
It also found that around half of respondents (49%) said financial content on social media has even made them feel pressured to improve their finances, and 33% have considered changing their financial goals or career aspirations as a result.
The FCA took enforcement action against 74 “finfluencers” last year, as it continues to target unregulated individuals who use social media to give financial advice. Last year was the second year to see a steep rise in action against finfluencers, who use social media to offer financial advice, often without the necessary credentials.
