AI applications are beginning to dramatically influence the experiences of retail investors around the world – from providing advice and automated portfolio management to ‘turbo-charging’ fraud and scams. Securities regulators are striving to understand, prioritize and address potential investor harms while fostering innovation.
BIT and the Ontario Securities Commission collaborated to synthesize existing evidence and generate new data to investigate this urgent issue through a behavioural science lens. In this report, we present our findings, including:
- Broad use cases of AI for retail investors, and their benefits and risks
- Results from an online randomized controlled trial evaluating how the source and quality of investment advice – from AI, a human or blend of the two – influences decision making
- Recommendations and considerations for regulators
Key takeaways for regulators
- Investment advice from a blended source – a human advisor using AI – was followed more closely than advice provided by a human or AI alone
- Regulating the provision of financial advice by AI is critical – as regardless of who was advising them, low-quality advice had a large effect on how people decided to invest
- In the right regulatory environment, AI has the potential to help investors navigate complex choices and guide their decision making
- While not the focus of our research, our trial revealed a strong instinct among Canadian investors to maintain a cash balance much larger than experts recommend – a potentially key area of focus for investor education
This report is a must-read for securities regulators taking an evidence-based approach to AI-related regulatory and educational activities across Canada and globally. Contact us here if you would like to discuss further.
