Britons Embrace AI for Financial Guidance as Traditional Advisers Become Unaffordable
In a striking shift, 40% of Britons are now turning to AI chatbots for financial advice, driven by being priced out of traditional advisory services. Critics label this trend as 'dangerous,' citing the unregulated nature of tools like ChatGPT, Gemini, and Co-Pilot. With the government pushing to transform savers into investors, more individuals may be tempted to rely on AI, but financial experts caution that this could lead to disastrous outcomes.
Experts Warn of Risks in AI-Driven Financial Decisions
Sophie Legrand-Green, head of policy at the Investing and Saving Alliance (TISA), highlights the dangers: 'There's nothing to stop AI from outputting rubbish or inappropriate advice for consumers. For those with low financial awareness, this can be quite hazardous.' Recent data underscores the trend: 65% of Gen Z and 61% of millennials used AI for personal finances in a Finder survey, while human advisers serving clients with under £50,000 dropped from 52% to 25% over six years.
George Sweeney, an FCA-approved financial adviser, notes that younger generations are 'hungry for information' but not being served, leading them to generative AI. However, he warns that AI advice is not tailored and often relies on outdated data, posing risks for investments and pensions.
Testing AI Chatbots: A Mixed Bag of Recommendations
To evaluate AI's capabilities, we tested three leading chatbots—ChatGPT, Microsoft Co-Pilot, and Google Gemini—which account for 92% of UK AI webpage views. We presented them with a scenario of having £16,000 in savings, the UK average, and asked for investment advice. Emma Wall, chief investment strategist at Hargreaves Lansdown, analyzed the results.
Overall, the guidance included core principles like risk appetite and tax-efficient ISAs, but some recommendations were flawed. Co-Pilot offered a list of 25 stocks and assets, but Wall criticized its lack of diversification and US-centric bias. ChatGPT provided investment plans but doubled up on US-focused funds and included inappropriate real estate allocations. Gemini emphasized consulting professionals but still gave themed stock picks that lacked practical vehicles for implementation.
Regulatory Gaps and the Future of Financial Advice
The Financial Conduct Authority (FCA) is addressing these issues with 'once-in-a-generation reforms' to introduce 'targeted support.' This new category will allow firms to offer scenario-based suggestions without full personalized assessments, making guidance more accessible. Sarah Pritchard of the FCA calls it 'game-changing,' but Sweeney remains skeptical, noting that people may still prefer free AI tools over paid advice.
Wesley Harrison of Benchmark Capital sees potential in AI for asset allocation but stresses that without in-depth knowledge, users risk poor decisions. As AI continues to evolve, balancing innovation with consumer protection remains a critical challenge for regulators and the financial industry.
