Artificial Intelligence and investing

Last week our blog looked at what to consider when getting advice from online finfluencers. This week were continuing our look at suspect online advice but this time we’re focusing on artificial intelligence (AI) being used by unregistered firms.

AI has become extremely popular across several industries and that includes finance and investing. However, just with other uses for AI such as search engine enhancements and chatbots, there are limitations and problems for early adapters.

For investors looking at AI as the next step in investment guidance understanding these limitations is key. Here are a few things investors need to remember and consider before investing with the help of AI:

AI cannot fully replace your own research

AI chatbots can seemingly answer any question you put to it. But remember, it’s getting the answers to these questions by processing vast amounts of data from the web. If you were to ask a chatbot such as ChatGPT or OpenAI “what stocks should I invest my money in to get great returns?” what data is the chatbot using to answer this question?

AI chatbots rely heavily on historical data which may not include real-time financial investment analysis or information. As you may be aware, in investing past performance does not guarantee future performance.

If you are thinking about using an AI chatbot for investment advice, be cautious and do your own supplemental research on their advice to ensure you have as much up-to-date information and data needed to make an informed investment decision.

AI may lack the expertise of experienced advisors, and will lack their questions

Investing is a very individual journey. A huge part of developing your investment portfolio is analysing your financial goals (short and long term), your time horizon, and your risk tolerance. AI bots have no way to determine any of these things which mean any recommendations or advice they provide you will not take any of it into account.

Recommendations provide by AI bots could be from sources that have unrecognized biases and the resulting advice is not appropriate for specific people. Without the full information that must be provided to an adviser, which may not be available to the AI bot, the recommendations could be incomplete and to put in bluntly, wrong for you.

AI chatbots may be used by fraudsters to recommend fraudulent platforms

Fraudsters have been getting in on the rise in popularity of AI by promoting fraudulent AI bots that they say can deliver guaranteed high returns. Ads promoting these types of AI investing bots have become very common and most, if not all, are connected to fraud.

If an AI bot recommends a specific investing platform or individual always ensure you check the registration of the platform or the individual. A registered platform or individual must comply with securities laws and investor protection laws.

AI chatbots are still relatively new and despite delivering some good information on various topics, there are several examples of problematic or false results as well. Keep this in mind when using AI for financial advice or as a financial resource.