The Financial Conduct Authority (FCA) has warned that people using artificial intelligence (AI) chatbots for financial advice have “no safety net” and could be risking their cash. Nearly half of those using AI for financial information mistakenly believe it is regulated by the watchdog in the same way human financial advisors must be.
Being FCA regulated ensures people get fair, honest and clear information, and holds advisors to account if they don't provide it, but most AI chatbots are not regulated. A third of people also thought they would be compensated if AI advised them incorrectly, but this is not true either – any money lost in investments recommended by AI won't be compensated or protected.
Younger investors most trusting of AI
New research from the FCA revealed the number of people relying on AI advice for their investments and finances. This included 56% of 18-40 year olds who hold or consider buying investments, saying they trust AI tools to advise on their decisions.
People also reported trusting AI more than TV and radio (47%), the press (46%) and social media influencers (29%). Additionally, three-quarters of respondents said they expect to rely on AI even more over the next year.
FCA tips for safe AI use
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. Our InvestSmart website can also help you make more informed decisions.”
A spokeswoman for the Financial Ombudsman Service told PA: “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.”
The research showed that while younger investors were more likely to trust AI than traditional media, they were also more aware of the limitations and issues around AI-generated information, with the majority understanding that it can be inaccurate and the need to check the sources.
General-purpose chatbots, such as OpenAI's ChatGPT and Google's Gemini, are not regulated by the FCA, while specific tools created to offer financial advice are more likely to be covered. The FCA shared five tips to safely use AI for investing and money advice: remember that AI can inform your decisions, but the final call is yours; check sources by asking where the information is from then verifying it yourself; understand that there's no safety net and you won't be covered if things go wrong; understand that with investments, past performance is not a guide to future returns so AI can't predict how investments will perform in the future; and remember that investing is a long-term game and plan for that.
