Swathes of the population are relying on AI chatbots for “dangerous” financial advice.
Priced out by traditional advisers, 40% of Britons are turning to unregulated guidance from the likes of ChatGPT, Gemini and Co-Pilot.
More may be tempted to join them after the government announced its mission to turn a nation of savers into investors – but financial experts warn AI advice could spell disaster.
“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).
“When you’ve got consumers who maybe don’t have high levels of financial awareness and literacy, that can be quite dangerous.”
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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.
Over the six previous years, the proportion of human advisers accepting clients with less than £50,000 in investable assets fell from 52% to 25%, while those only serving clients with £200,000 or more trebled from 11% to 30%, data from Schroders, the asset management company, shows.
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“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.
“It’s not tailored to them and then worse than that, it’s using years-old data to provide financial advice around, say, investments or pensions, which could be a bit of a disaster.”
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Wild wild west
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.
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.
Human financial advisers are required to charge for their services, making it a regulated product for which they must seek authorisation from the FCA.
If they were to provide inappropriate or misleading advice, customers would be entitled to compensation.
“[If customers] get that exact same information from ChatGPT, there are no protections,” said Legrand-Green.
Users often don’t understand the financial climate, their capacity for risk or what goals are appropriate. That’s not a problem when your human adviser does, but AI can be just as clueless as you are, said Sweeney.
“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,” agreed Legrand-Green.
“These tools can be a really good force for change and for helping to upskill people. It’s just at the moment it’s a bit Wild Wild West.”
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Warmer words for AI came from Wesley Harrison, Benchmark Capital’s managing director of financial planning, despite competing with the chatbots for clients.
“I’ve tested them myself, asked some client scenarios and seen the output, and sometimes it can be quite good,” he said.
“It can do a great asset allocation on a portfolio using quite generic information.”
But that’s about as far as it goes, and without already having in-depth knowledge yourself, it’s “definitely a risk”.
“Being a financial adviser myself, I know what questions to ask to get the output that I need and I can refine those questions.
“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.”
Putting bots through their paces
The Money team put this to the test using three leading chatbots: ChatGPT, Microsoft Co-pilot and Google Gemini, which account for 92% of AI chatbot webpage views in the UK, according to Statcounter.
In December, we told the chatbots we had £16,000 in savings – the UK average – and asked how best to invest it, before taking the results to Emma Wall, chief investment strategist at the financial services firm Hargreaves Lansdown, for analysis.
“Overall, the guidance includes some of the core principles that investors should consider when developing a portfolio, such as considering your risk appetite before investing and how this would impact the mix of asset classes you should diversify across,” Wall said.
“It also identifies the merits of using a tax-efficient wrapper such as an ISA to maximise returns. However, some other recommendations are less sensical.”
Let’s take a closer look…
Co-Pilot
Microsoft’s Co-pilot produced a list of 25 stocks, commodities (raw materials), bonds, exchange-traded funds (regulated and underwritten investment funds known as ETFs), and real estate and crypto opportunities.
“Allocation depends on your risk profile, time horizon and goals,” it advised, before offering up a “medium risk” plan with a “long-term horizon”.
“Of the stock selections, it’s a good basket of top-quality tech but clearly lacks diversification,” Wall said.
“If those stocks were all an investor held in their portfolio, they would have significant concentration and correlation risk.”
Stock descriptions were accurate, but there was little evaluation aside from saying Meta had been recently under pressure, she said.
“The descriptions are missing any discussion on key risks of each company, which a good human analyst would provide.”
With expensive valuations, it wasn’t a good time to buy Alphabet stock, Wall said, suggesting Meta stock would actually be more advisable.
Beyond stocks, many of Co-pilot’s recommendations were far too US-centric for a British retail investor, she said.
“This may be a bias due to asking a predominantly US trained large-language-model, where the market is larger and more liquid.”
A Microsoft spokesperson said its AI services were not designed or intended to replace professional advice, including financial advice.
“Copilot combines information from multiple web sources into a single response with linked citation.
“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.”
ChatGPT
ChatGPT kicked off with 16 options grouped by five themes: stocks, funds, real estate, low-risk and alternatives.
Among them were tech, pharmaceutical and energy giants, broad market index funds, and general references to Canadian real estate investment trusts, savings accounts, bonds, AI, biotech and private equity.
It warned investors need to think about their risk appetite, diversification, time horizon and cash flow, before creating three “specific, UK-appropriate investment plans you could implement right now” with varying risk. We’ve focused on the plan ChatGPT “personally” recommended.
It advised us to invest via a stocks and shares ISA with Vanguard Investor, AJ Bell, Hargreaves Lansdown or Trading 212.
The chatbot recommended investing £8,000 immediately and another £8,000 over six to 12 months through the following portfolio…
Wall appeared less than impressed, explaining the chatbot doubled up on its US investment recommendations, which would incur trading charges and force a beginner investor to manually rebalance their portfolio.
Not only was £3,200 allocated to a fund tracking publicly traded US companies, but another £6,400 was allocated to a global stock market fund, Vanguard FTSE All World, which is mostly (65%) made up of US stocks.
Just like Co-Pilot, ChatGPT had slipped up on real estate, Wall added.
“We would not advocate 10% in property for a UK investor, where the market is under significant pressures.
“Additionally, 10% in cash is a lot in a balanced portfolio, particularly in a falling rate environment.
“We would instead look to allocate to government bonds where there is liquidity and superior income, and gold, which offers diversification and downside protection.”
OpenAI told Money that ChatGPT is designed as a general-purpose assistant that presents information based on online sources, not definitive advice.
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.
It is trained to recommend consulting certified specialists when appropriate and to remind users it can make mistakes, said the company.
Gemini
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.
The chatbot then highlighted AI, renewable energy, healthcare and defence/aerospace as attractive, high-growth and potentially volatile areas for investment.
Stock recommendations followed: the industrials sector generally, banks in Europe and tech stocks in Korea and Taiwan.
Savings accounts and bonds were offered as alternatives to investing.
At this stage, in contrast to Co-pilot and Chat GPT, the chatbot cautioned that “I am not a financial adviser”, its advice “should not be taken as personalised” and “you should always consult with a qualified financial professional before making investment decisions”.
Gemini then produced three “balanced” and “moderate-risk” five-year-plus plans for a British investor.
All options started with opening a stocks and shares ISA with platforms like Vanguard or iWeb, and were prefaced with a warning to set aside three to six months of living expenses as a safety net.
Wall’s verdict?
“The initial themed and stock recommendations highlight four high-growth themes, yet in the stocks section, at least, only zones in on one.
“Renewable energy is highlighted, but doesn’t seem to be targeted through the stocks or the funds either.
“And while it mentions commodities, it gives you no vehicles to choose from.
“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.”
A Google spokesperson said this case showed Gemini was performing as intended by “prioritising user safety on sensitive topics”.
“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.”
‘Game-changing’ reforms
With so much room for improvement among AI recommendations and so much capital required to access a human financial adviser’s services, the average saver might feel at a loss.
The FCA hopes to change that with what it’s calling “once-in-a-generation reforms”.
Banks, wealth managers, pensions firms and 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.
Soon, though, firms will be allowed to offer “targeted support”: a new category of ready-made suggestions based on scenarios commonly faced by customers, like managing retirement income or excess savings, that are more tailored than a leaflet, but less expensive than financial advice.
“Targeted support will be game-changing. It means millions of people can get extra help to make better financial decisions,” said Sarah Pritchard, deputy chief executive at the FCA.
Benchmark Capital’s Harrison hopes the changes will make guiding lower-net-worth clients more cost-effective.
“You’ve had a lot of regulation in recent years. Cost to serve clients is higher,” he said.
“We are all trying to serve these clients and trying to do it cost effectively.”
Sweeney was less optimistic: “I don’t know if even things like that would address the problem,” she said.
“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’.”
