Four in five less experienced investors have used AI for help with investing, with around two-thirds doing so occasionally or regularly, but almost half mistakenly believe the information they receive is regulated, according to the Financial Conduct Authority.
New research carried out by the regulator focused on 18-40 year olds who own or are considering investments showed more than half (56%) trust AI tools. This compares with 47% who trust what they see on TV and radio, 46% who trust the press and 29% who trust social media influencers.
It also found people are also getting more comfortable using the technology, with two-thirds expecting to lean on AI even more over the next year.
However, the FCA said many investors may be misunderstanding the level of protection afforded to AI advice.
Almost half (44%) mistakenly believe AI-generated financial information is regulated, while 38% believe it is fine to make an investment decision based solely on the outputs of AI.
The FCA said a third (32%) also wrongly think they would get compensation from the Financial Services Compensation Scheme or Financial Ombudsman if AI advice went wrong.
However, almost three-quarters (73%) did acknowledge that AI can provide inaccurate information.
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.”
Rob Hillock, head of personal financial planning at Broadstone, warned that confidence is overtaking understanding.
He explained: “AI is rapidly becoming the first port of call for a new generation of retail investors, but confidence is clearly running ahead of understanding.
“The rapid growth of low-cost trading apps has put stock-picking and crypto investment within easy reach, while AI can appear to offer free, instant guidance on which investments will be the next winners creating a potentially dangerous combination.
“AI can make investing more accessible by explaining complex concepts and supporting research, but it cannot replace regulated financial advice or personal judgement. Crucially, it cannot necessarily replicate the personalised assessment needed to determine whether an investment is suitable for an individual’s objectives, time horizon, appetite for risk and capacity for loss.
“Investors must verify AI’s outputs, understand the risks and be clear about what protection they have before putting their money on the line.”
Dan Coatsworth, head of markets at AJ Bell, said: “AI systems are still learning, and there is a risk they could be scanning social media or websites for information that is ultimately incorrect. The AI system might not know the details are false, thereby exposing the end user to inaccuracies.
“It is vital to do your own research with investments and not act blindly simply because someone else – machine or human – says it is a good idea.
“The FCA’s research highlights that many younger people are putting faith in AI for investing. It would be devastating if they made major investing mistakes by trusting AI as that could dampen their enthusiasm for saving for the future.
“People having a bad experience might become less willing to put away as much as possible and that could lead to a poor quality of life down the line.”
AI pensions advice
According to Standard Life, the use of AI also extends to pensions. Its own research found almost three in 10 (29%) 18-34 year olds have already used AI to get information about pensions or saving for retirement, compared with 16% of 35-54 year olds and just 6% of those aged 55 and over.
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.
Among younger people who have used it for retirement information, 41% have turned to AI to understand how pensions work, a third (33%) have used it to navigate pension tax rules and 32% to explore how they could save more.
Walsh said: “However, this isn’t simply passive research – 62% 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.
“Used well, AI could have an important role in helping people engage earlier with their retirement planning, breaking down jargon and prompting questions they might otherwise never ask. At the same time, it should be a starting point rather than the final word.
“Pensions are long-term and often complex, and as use of AI grows, the priority should be helping people combine the convenience of new technology with reliable information, appropriate guidance, targeted support and, where possible, regulated financial advice,” she added.
Main image: AI, conny-schneider-xuTJZ7uD7PI-unsplash
