UK watchdog warns as more people use AI chatbots for money advice

In short: More people are asking AI chatbots for personal finance advice, and the UK regulator says this creates new risks and rule gaps.

What's going on

A growing number of people are using general AI chatbots as a first stop for money questions, similar to how many people use “Dr Google” before seeing a doctor. The Financial Conduct Authority (FCA), the UK financial watchdog, said almost a fifth of UK consumers now use AI for help with personal finances.

The FCA’s survey suggests people are not only asking for simple explanations. It found 61 percent of AI users asked the tools for suggestions, and nearly a quarter said they upload personal data such as bank statements to get better answers.

This shift is worrying some traditional wealth managers and financial advice firms. Investors have recently pushed down the share prices of mass-market wealth managers such as Charles Schwab and Raymond James in the US, and St James’s Place in the UK, partly due to fears that “free” AI advice could reduce demand for paid advisers.

At the same time, the Financial Times notes that big financial firms have the money and customer data to build their own digital advice tools. The problem is regulation. Regulated firms face strict rules on giving personalised advice, while tech platforms can often respond more freely.

What to watch

The FCA warned about an “uneven playing field” between regulated firms and chatbots. Many users may not understand the limits, with only 40 percent of survey respondents realising there may be no formal way to complain if AI advice goes wrong. Next steps could include clearer warnings when people ask chatbots what to do with their savings, or prompts that steer users toward licensed human advisers.

Source: Financial Times