The Financial Conduct Authority (FCA) has issued a warning to people using artificial intelligence (AI) to help make decisions about their money. New research from the financial regulator found four in five less experienced investors have used AI for help with investing, with around two-thirds using the technology occasionally or regularly.
Misunderstandings about protection
However, the FCA found significant misunderstandings about the protection available when people rely on AI-generated financial information. Almost half (44%) mistakenly believe such information is regulated, while 38% think it is acceptable to make an investment decision based solely on AI output.
Around one in three (32%) also wrongly believe they could receive compensation from the Financial Services Compensation Scheme (FSCS) or Financial Ombudsman Service if AI advice went wrong.
The FCA research focused on people aged 18 to 40 who currently have investments or would consider investing during the next 12 months. It found 56 per cent trust AI tools, compared with 47 per cent for TV and radio, 46 per cent for the press and 29 per cent for social media influencers. Two-thirds also expect to use AI even more over the next year.
AI tools are not necessarily regulated
The FCA stressed that general-purpose AI chatbots are not regulated by the financial watchdog. This is different from an AI tool specifically designed to provide financial advice, which would be likely to fall within the FCA's regulatory remit.
The regulator said people can use AI to help research financial decisions but should check the original sources behind the information they receive and use their own judgement before acting. There may also be no financial safety net if someone loses money after following information provided by a general-purpose AI chatbot.
The FCA found that most respondents recognised some of the risks. Nearly three-quarters (73%) knew AI could provide inaccurate information and 86% understood that they should check the sources referenced by an AI tool.
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.”
Younger people also using AI for pensions
Separate research from Standard Life suggests the growing use of AI for financial information also extends to retirement planning. It found 29 per cent of people aged 18 to 34 have used AI to obtain information about pensions or saving for retirement.
That compares with 16 per cent of people aged 35 to 54 and just 6 per cent of those aged 55 and over. Among younger people who had used AI for retirement information, 41 per cent had used it to understand how pensions work, 33 per cent to navigate pension tax rules and 32 per cent to explore how they could save more.
Significantly, 62 per cent said AI had influenced decisions they made about their pension or retirement saving to at least some or a great extent. Donna Walsh, Head of Master Trust and IGC Governance at Standard Life, said: “There are clear positives if AI can help make pensions feel simpler and more accessible. However, this isn’t simply passive research - 62 per cent say AI has influenced decisions they’ve made about their pension or retirement saving to at least some or a great extent. That underlines why accuracy, appropriate safeguards and knowing when to turn to trusted or regulated sources really matter, particularly at a time when scams and fraudulent activity are becoming increasingly sophisticated and technology can make it harder to distinguish credible information from misleading content.”
Five tips for using AI for financial research
The FCA has issued five tips for people using AI when researching decisions about their money. It recommends: stay in control, as AI can provide information but people should make the final decision themselves; check the sources, by asking where information has come from and independently verifying it; understand the protection, as general-purpose AI-generated tips do not come with the protection associated with regulated financial advice; don't rely on predictions, as AI can provide historical information but cannot predict how an investment will perform; and think long-term, as the FCA warns that investing should not be treated as a way to get rich quickly, regardless of where a tip originated.
Ms Walsh said AI could help people engage with retirement planning earlier by breaking down complicated information and prompting them to ask questions. However, she added: “It should be a starting point rather than the final word.”
