UK regulator flags AI advice misunderstanding among young investors

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UK regulator flags AI advice misunderstanding

Highlights

FCA survey shows 44% of UK adults aged 18-40 wrongly think AI chatbot financial advice is regulated, while 32% believe compensation would apply for bad AI advice.
2025 Lloyds Banking Group survey finds 76% of 18-24-year-olds have used AI for personal finance, compared to 47% of those aged 55-64.
Financial Services Compensation Scheme confirms £85,000 maximum protection applies only to regulated firms, excluding most general-purpose AI tools used for financial decisions.

FCA survey highlights protection gap

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

The watchdog says AI can help consumers research companies or explore options before making an investment 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 hold investments or say they would consider buying them soon.

Use of AI tools for budgeting, investing and other personal finance decisions is rising across age groups, with particularly strong adoption among younger consumers. A 2025 Lloyds Banking Group survey found 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.

Consultancy executives say the technology can broaden access to basic financial information, but also creates risks when users treat chatbot responses as a final decision point rather than an initial prompt. Broadstone's head of personal financial planning, Rob Hillock, says AI is rapidly becoming the first stop for a new generation of retail investors, while Fairview Investing director Ben Yearsley says clearer risk warnings should accompany chatbot answers to financial questions.

Implications for UK retail investing

Confidence in AI outputs appears to be extending into investment behaviour. The FCA survey finds 38 per cent of 18- to 40-year-olds believe it is acceptable to make an investment decision based solely on AI-generated output.

At the same time, the findings suggest some awareness of the technology's limits. Eighty-six per cent of respondents say they understand the need to check sources referenced by AI when researching an investment, and Boring Money founder and chief executive Holly Mackay says users are showing a generally healthy level of scepticism.

The bigger risk for the sector may be confusion over where regulated advice begins and ends, especially when established financial brands use AI to offer lower-cost support. The Financial Services Compensation Scheme says it protects only regulated financial services provided by authorised firms, and general-purpose AI tools are unlikely to fall within its scope; the scheme can pay up to £85,000 to an individual who loses money because of bad advice from a UK-regulated financial institution that later went out of business after April 1 2019.

In our earlier article on the FCA survey into AI chatbots and investing, we highlighted that many UK adults aged 18–40 mistakenly assume chatbot-provided financial information is regulated and that compensation would apply if the guidance proves wrong. We also noted growing reliance on AI in personal finance—especially among younger users—and the risk that consumers treat AI outputs as decision-ready advice despite the limits of FSCS protection.

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