The Ontario Securities Commission (OSC) has published a report detailing the results of a behavioral science experiment that focused on the role of artificial intelligence (AI) in supporting retail investor decision-making.
“Artificial Intelligence and Retail Investing: Use Cases and Experimental Research” consisted of an online investment simulation to test how closely Canadians followed a suggestion for how to invest a hypothetical $20,000.
“No discernible difference in adherence to investment suggestions provided by a human or AI tool”
Participants were told the suggestion came from one of three sources: a human financial services provider, an AI tool, or a human financial services provider using an AI tool (a ‘blended’ approach).
The research team then measured how closely participants adhered to the investment suggestion when investing their $20,000. The paper concluded there was no discernible difference in adherence to investment suggestions provided by a human or AI tool, indicating Canadian investors may be receptive to taking advice from an AI system.
Leslie Byberg, Executive Vice President, Strategic Regulation at the OSC, said: “This research highlights the opportunities AI can create for Canadian investors and market participants. It is important that we are agile and able to harness these opportunities while ensuring investor protection remains at the forefront of how we regulate.”
As to the current investor-facing use cases of AI in Canada and abroad, the regulator identified three broad use cases:
- Decision support involves AI systems that provide recommendations or advice to guide investment decisions.
- Automation consists of AI systems that automate portfolio and/or fund (e.g., ETF) management.
- Scams and fraud includes AI systems that either facilitate or mitigate scams targeting retail investors, as well as scams capitalizing on the “buzz” of AI.
AI could make investing advice more affordable
The report admits that AI systems could provide increased access to more affordable advice for investors, but there is also the possibility that systems may provide investors with advice that is biased or not relevant, appropriate, or accurate. There is also an increased risk of AI-enhanced scams and frauds.
As AI continues to advance in capabilities, more research is needed to help capital markets stakeholders better understand the implications for retail investors. The OSC partnered with the Behavioural Insights Team(BIT) to conduct this research.
In the meantime, we’ve been witnessing the rise of AI-powered trade signals and market insights, coming from leading FX industry names such as Acuity Trading, as well as IBM Watsonx, and GPT-4.
iFi launched AI-powered trade signals with IBM Watsonx
iFi AI recently went live with its AI-powered stock research platform developed in collaboration with IBM Watsonx. Claiming to revolutionize stock and ETF trading, iFi AI provides trade ideas for retail investors. Developed by IBM Watsonx, iFi AI is already managing over $6 billion in institutional assets, and is expected to continue on its accelerated growth trajectory worldwide.
