\n Priced-out Britons are using AI for financial advice. Critics call it ‘dangerous’ – we put the chatbots to the test\n <\/p>\n
Swathes of the population are relying on AI chatbots for “dangerous” financial advice.\u00a0<\/p>\n
Priced out by traditional advisers, 40% of Britons are turning to unregulated guidance from the likes of ChatGPT, Gemini and Co-Pilot.\u00a0<\/p>\n
More may be tempted to join them after\u00a0the government announced its mission to turn a nation of savers into investors – but financial experts warn AI advice could spell disaster.\u00a0<\/p>\n
“There’s nothing to stop it putting out rubbish or putting out things that are completely inappropriate for the consumer,” said Sophie Legrand-Green, head of policy at the Investing and Saving Alliance (TISA).\u00a0<\/p>\n
“When you’ve got consumers who maybe don’t have high levels of financial awareness and literacy, that can be quite\u00a0dangerous.”<\/p>\n
Last year, 65% of Gen Z (aged 18-28) and 61% of millennials (29-44) said they used AI for help with personal finances, according to a Finder survey of 2,000 people.\u00a0<\/p>\n
Over the six previous years, the proportion of human advisers accepting clients with less than \u00a350,000 in investable assets fell from 52% to 25%, while those only serving clients with \u00a3200,000 or more trebled from 11% to 30%, data from Schroders, the asset management company, shows.\u00a0<\/p>\n
“Among millennials and Gen Z, a lot of people are hungry for information and they’re not being served it and they’re turning to generative AI tools,” said George Sweeney, a Financial Conduct Authority-approved financial adviser and deputy editor of investing at Finder.\u00a0<\/p>\n
“It’s not tailored to them and then worse than that, it’s using years-old data to\u00a0provide financial\u00a0advice around, say, investments or pensions, which could be a bit of a disaster.”<\/p>\n
Wild\u00a0wild\u00a0west\u00a0<\/p>\n
AI tech giants warn their products are not intended to be used in lieu of professional advice, but there’s little to stop users from asking chatbots questions on personal finance and investing.<\/p>\n
There’s a “chink in the armour of the FCA and the Treasury” when it came to AI, says TISA’s Legrand-Green, a former lead associate at the regulator.<\/p>\n
Human financial advisers\u00a0are required to\u00a0charge for their services, making it a regulated product for which they must seek authorisation from the FCA.\u00a0<\/p>\n
If they were to provide inappropriate or misleading advice, customers would be entitled to compensation.\u00a0<\/p>\n
“[If customers] get that exact same information from ChatGPT, there are no protections,” said Legrand-Green.\u00a0<\/p>\n
Users often\u00a0don’t\u00a0understand the financial climate, their capacity for risk\u00a0or\u00a0what goals are\u00a0appropriate. That’s\u00a0not a problem when\u00a0your\u00a0human adviser does, but AI\u00a0can be\u00a0just as clueless as you are, said Sweeney.\u00a0<\/p>\n
“ChatGPT could be ranking some blog on BuzzFeed with the same kind of importance as the latest Financial Reporting Council report from the Bank of England,”\u00a0agreed Legrand-Green.<\/p>\n
“These tools can be a really good force for change and for helping to upskill people.\u00a0It’s\u00a0just\u00a0at the moment it’s\u00a0a bit Wild\u00a0Wild\u00a0West.”<\/p>\n
Warmer words for AI came from Wesley Harrison, Benchmark Capital’s managing director of financial planning, despite competing with the chatbots for clients.\u00a0<\/p>\n
“I’ve tested them myself, asked some client scenarios and seen the output, and sometimes it can be quite good,” he said.\u00a0<\/p>\n
“It can do a great asset allocation on a portfolio using quite generic information.”<\/p>\n
But\u00a0that’s\u00a0about as far as it goes, and without already having in-depth knowledge yourself,\u00a0it’s\u00a0“definitely a risk”.\u00a0<\/p>\n
“Being a financial adviser myself, I know what questions to ask to get the output that I need and I can refine those questions.\u00a0\u00a0<\/p>\n
“A lot of clients I’ve had in the past, they just wouldn’t know the right questions to ask, and that’s where the risk comes in.”\u00a0<\/p>\n
Putting bots through their paces\u00a0<\/p>\n
The Money team put this to the test using three leading chatbots:\u00a0ChatGPT, Microsoft Co-pilot and Google Gemini, which account for 92% of AI chatbot\u00a0webpage views in the UK, according to\u00a0Statcounter.\u00a0<\/p>\n
In December, we\u00a0told the\u00a0chatbots\u00a0we had \u00a316,000 in savings – the UK average – and asked\u00a0how best to invest it, before taking the results to Emma Wall, chief investment strategist at the financial services firm Hargreaves Lansdown, for analysis.\u00a0<\/p>\n
“Overall, the guidance\u00a0includes\u00a0some of the core principles that investors should consider when developing a portfolio, such as considering your risk appetite before investing and how this would\u00a0impact\u00a0the mix of asset classes you should diversify across,” Wall said.<\/p>\n
“It also\u00a0identifies\u00a0the merits of using a tax-efficient wrapper such as an ISA to maximise returns. However, some other recommendations are less sensical.”<\/p>\n
Let’s take a\u00a0closer look…\u00a0<\/p>\n
Co-Pilot<\/p>\n
Microsoft’s Co-pilot\u00a0produced\u00a0a list of 25 stocks,\u00a0commodities (raw materials), bonds,\u00a0exchange-traded funds (regulated and underwritten investment funds known as\u00a0ETFs), and real estate and crypto opportunities.\u00a0<\/p>\n
“Allocation depends on your risk profile, time horizon and goals,” it advised, before offering\u00a0up\u00a0a “medium risk” plan with a “long-term horizon”.\u00a0<\/p>\n
“Of the stock selections, it’s a good basket of top-quality tech but clearly lacks diversification,” Wall said.\u00a0<\/p>\n
“If those stocks were all an investor held in their portfolio, they would have significant concentration and correlation risk.”<\/p>\n
Stock descriptions were accurate, but\u00a0there was little\u00a0evaluation aside from saying Meta had been recently under pressure, she said.\u00a0<\/p>\n
“The descriptions are missing any discussion on key risks of each company, which a good human analyst would provide.”\u00a0<\/p>\n
With expensive valuations, it\u00a0wasn’t a good time\u00a0to buy Alphabet stock, Wall said, suggesting Meta stock would actually be more advisable.\u00a0<\/p>\n
Beyond stocks, many of Co-pilot’s recommendations were far too US-centric for a British retail investor, she said.<\/p>\n
“This may be a bias due to asking a predominantly US trained large-language-model, where the market is larger and more liquid.”<\/p>\n
A Microsoft spokesperson said its AI services were not designed or intended to replace professional advice, including financial advice.<\/p>\n
“Copilot combines information from multiple web sources into a single response with linked citation.\u00a0<\/p>\n
“With any AI system, we encourage people to verify the accuracy of content, and we remain committed to listening to feedback to improve our AI technologies.”<\/p>\n
ChatGPT\u00a0<\/p>\n
ChatGPT kicked off with 16 options grouped by five themes: stocks, funds, real estate, low-risk\u00a0and alternatives.\u00a0<\/p>\n
Among\u00a0them\u00a0were tech, pharmaceutical and energy giants, broad market index funds, and general references to Canadian real estate investment trusts, savings accounts, bonds, AI,\u00a0biotech\u00a0and private equity.\u00a0<\/p>\n
It warned investors need to think about their risk appetite, diversification, time horizon and cash flow, before creating three “specific, UK-appropriate investment plans\u00a0you could implement right now” with varying risk.\u00a0We’ve\u00a0focused on the plan ChatGPT “personally” recommended.\u00a0<\/p>\n
It\u00a0advised\u00a0us\u00a0to\u00a0invest via a stocks and shares ISA with Vanguard Investor, AJ Bell, Hargreaves\u00a0Lansdown\u00a0or Trading 212.<\/p>\n
The chatbot recommended investing \u00a38,000\u00a0immediately\u00a0and another \u00a38,000 over six to 12 months\u00a0through the following portfolio…\u00a0<\/p>\n
Wall appeared less than impressed, explaining the chatbot doubled up\u00a0on\u00a0its US investment recommendations,\u00a0which would\u00a0incur trading charges and force\u00a0a beginner investor to manually rebalance their portfolio.\u00a0<\/p>\n
Not only was\u00a0\u00a33,200\u00a0allocated to a fund\u00a0tracking publicly traded US companies,\u00a0but another \u00a36,400 was allocated to a global stock market fund, Vanguard FTSE All World, which is mostly\u00a0(65%)\u00a0made up of US stocks.\u00a0<\/p>\n
Just like Co-Pilot, ChatGPT had slipped up on real estate, Wall added.<\/p>\n
“We would not advocate 10% in property for a UK investor, where the market is under significant pressures.\u00a0<\/p>\n
“Additionally, 10% in cash is a lot in a balanced portfolio, particularly in a falling rate environment.\u00a0\u00a0<\/p>\n
“We would instead look to allocate to government bonds where there\u00a0is\u00a0liquidity and superior income, and gold, which offers diversification and downside protection.”<\/p>\n
OpenAI told Money that ChatGPT is designed as a general-purpose assistant that presents information based on online sources, not definitive advice.\u00a0<\/p>\n
The chatbot is useful for explaining financial concepts, modeling scenarios, simulating savings growth, and building plans and projections, OpenAI said, but it is not a substitute for a licensed financial advisor.<\/p>\n
It is trained to recommend consulting certified specialists when appropriate and to remind users it can make mistakes, said the company.<\/p>\n
Gemini\u00a0\u00a0<\/p>\n
Google Gemini was quick to caution that “best” investments always “depend on your personal financial situation, risk tolerance, and time horizon” and no investment was guaranteed.\u00a0<\/p>\n
The chatbot\u00a0then highlighted AI, renewable energy, healthcare and defence\/aerospace as attractive, high-growth and potentially volatile areas\u00a0for investment.\u00a0<\/p>\n
Stock recommendations\u00a0followed: the industrials\u00a0sector generally, banks\u00a0in Europe and tech stocks in Korea and Taiwan.\u00a0<\/p>\n
Savings\u00a0accounts\u00a0and bonds\u00a0were offered as alternatives to investing.\u00a0<\/p>\n
At this stage, in\u00a0contrast to Co-pilot and Chat GPT,\u00a0the chatbot cautioned that “I am not a financial adviser”,\u00a0its advice “should not be taken as personalised” and “you should always consult with a qualified financial professional before making investment decisions”.\u00a0<\/p>\n
Gemini then\u00a0produced three\u00a0“balanced” and “moderate-risk” five-year-plus\u00a0plans for a British investor.<\/p>\n
All options\u00a0started with opening a stocks and shares ISA with platforms like Vanguard or\u00a0iWeb, and\u00a0were prefaced with a warning to set aside three to six months of living expenses as a safety net.\u00a0<\/p>\n
Wall’s verdict?\u00a0<\/p>\n
“The\u00a0initial\u00a0themed and stock recommendations highlight four high-growth\u00a0themes,\u00a0yet\u00a0in the stocks section, at least, only zones in on one.\u00a0\u00a0<\/p>\n
“Renewable energy is highlighted, but\u00a0doesn’t\u00a0seem to be targeted through the stocks or the funds either.\u00a0\u00a0<\/p>\n
“And while it mentions commodities, it gives you no vehicles to choose from.\u00a0\u00a0<\/p>\n
“Uninformed individuals who may not have the knowledge to find exchange-traded options or to dive through the nuances of the mining life cycle might end up making poor choices.”<\/p>\n
A Google spokesperson said this case showed Gemini was performing as intended by “prioritising user safety on sensitive topics”.\u00a0<\/p>\n
“We build disclaimers directly into the app prompting users to double-check information and, for financial, legal, or medical matters, we go a step further by explicitly recommending that users consult with qualified professionals.”<\/p>\n
‘Game-changing’ reforms\u00a0<\/p>\n
With\u00a0so much room for improvement among AI recommendations\u00a0and so much capital\u00a0required\u00a0to access a human financial\u00a0adviser’s\u00a0services, the average saver\u00a0might feel at a loss.<\/p>\n
The FCA hopes to change that with what\u00a0it’s\u00a0calling\u00a0“once-in-a-generation reforms”.\u00a0<\/p>\n
Banks, wealth managers, pensions firms\u00a0and financial advisers are only allowed at present to provide financial recommendations if they carry out a full, personalised suitability assessment for their client – a service that comes with a hefty price tag.\u00a0<\/p>\n
Soon, though,\u00a0firms\u00a0will be allowed to offer “targeted support”: a new category\u00a0of\u00a0ready-made suggestions based on\u00a0scenarios\u00a0commonly faced by customers,\u00a0like managing retirement income or\u00a0excess savings, that are more tailored than a leaflet, but less expensive than financial advice.\u00a0\u00a0<\/p>\n
“Targeted support will be game-changing. It means millions of people can get extra help to make better financial decisions,” said\u00a0Sarah Pritchard, deputy chief executive at the FCA.\u00a0<\/p>\n
Benchmark Capital’s Harrison hopes the changes will make guiding lower-net-worth clients more cost-effective.<\/p>\n
“You’ve had a lot of regulation in recent years. Cost to serve clients is higher,” he said.<\/p>\n
“We are all trying to serve these clients and trying to do it cost effectively.” <\/p>\n
Sweeney was less optimistic: “I don’t know if even things like that would address the problem,” she said.<\/p>\n
“People would still have the perception that ‘oh I don’t have a lot of money so I shouldn’t go and see a financial adviser, I’ll just use this free tool to get an idea instead’.”<\/p>\n","protected":false},"excerpt":{"rendered":"Priced-out Britons are using AI for financial advice. Critics call it ‘dangerous’ – we put the chatbots to…\n","protected":false},"author":2,"featured_media":491424,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,131,132],"class_list":["post-491769","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-ca","tag-canada","tag-finance","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/491769","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=491769"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/491769\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/491424"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=491769"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=491769"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=491769"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}