UK watchdog flags AI advice misunderstanding among young investors

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AI advice misunderstanding UK

Highlights

FCA reports 44% of UK adults aged 18-40 mistakenly think AI chatbot financial information is regulated, and 32% wrongly expect compensation for faulty AI advice.
Thirty-eight percent of surveyed young investors believe it's acceptable to make investment decisions solely based on AI outputs, reflecting growing reliance amid knowledge gaps.
Lloyds' 2025 survey shows 76% of 18-24-year-olds used AI for personal finance compared to 47% of 55- to 64-year-olds, indicating faster adoption among younger groups.

FCA survey highlights protection gap

As reported by Financial Times, citing the Financial Conduct Authority, 44 per cent of UK adults aged 18 to 40 surveyed say they think financial information from AI chatbots is regulated, while 32 per cent wrongly believe they would receive compensation if AI advice proves faulty.

The regulator says AI can help people research companies or explore investment options before making a decision, but users still need to apply their own judgment and understand the limits of available protections. Its survey covers nearly 700 UK adults in this age group who either already own investments or would consider buying them soon.

Thirty-eight per cent of respondents in the same age group also believe it is acceptable to make an investment decision based only on AI outputs. The findings add to broader evidence that younger consumers are turning to AI tools for budgeting, investing and other personal finance decisions at a faster pace than older groups.

According to a 2025 survey by Lloyds Banking Group, 76 per cent of 18- to 24-year-olds have used AI for personal finance, compared with 47 per cent of 55- to 64-year-olds.

Industry warns on risks and consumer assumptions

Rob Hillock, head of personal financial planning at consultancy Broadstone, says AI is rapidly becoming the first stop for a new generation of retail investors, but that confidence is running ahead of understanding. Ben Yearsley, director at consultancy Fairview Investing, says AI tools can be a useful starting point for financial information and may help narrow the knowledge gap between people who can afford regulated advice and those who cannot.

Yearsley says many users go wrong when they treat AI as the final answer rather than a first step, adding that AI companies should introduce clear risk warnings when chatbots respond to financial questions. Ben Pashley, chief AI officer at wealth manager Evelyn Partners, says chatbot answers can sound like personal recommendations without the accountability or data protection attached to regulated financial guidance.

The research also suggests many young adults recognise some of the dangers. Eighty-six per cent of those surveyed say they understand the need to verify sources when using AI to research an investment. Holly Mackay, founder and chief executive of finance site Boring Money, says people are often using AI sensibly and with scepticism, but warns that consumers may assume AI tools offered by financial brands amount to regulated advice with the same protections.

The Financial Services Compensation Scheme can pay up to £85,000 to an individual who loses money because of bad financial advice from a UK-regulated financial institution that later goes out of business after April 1 2019. The FSCS says it protects only regulated financial services provided by authorised firms, and that general-purpose AI tools are unlikely to fall within its scope.

In our earlier article, we covered the UK Treasury’s plan to expand the Bank of England’s role in digital payments by adding a secondary objective focused on innovation in payment systems and digital money, including stablecoins. We also noted that the BoE would be expected to report annually to Parliament on progress, reflecting a broader push to keep regulation aligned with fast-changing financial technology while maintaining financial stability.

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