The AI advice gap: what happens when the machine says “yes”?
Ask a UK bank for investment advice, and you get a lawful recommendation. If it was negligent, you will have the right to make a claim using the Financial Services Compensation Scheme.
Ask ChatGPT, or, more fashionable, Claude, the same question and you get nothing. Just an answer, but it will be delivered with a more confident tone, no matter whether it’s right or absolutely wrong.
Despite that, more than a quarter of UK consumers now say they trust AI chatbots for money advice. The Financial Conduct Authority found this figure and flagged it as a live concern in its most recent review.
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Other surveys found even higher figures. STRAT7 found 55% of UK adults have used AI for financial guidance, Sky News reported 40%, and EY’s global study measured Gen Z adoption at 68%. Whatever the precise number is, the direction is the same.
People have started to trust AI more and more in their financial decisions. But the debate about it has, so far, been asking the wrong question.
What is the wrong question?
Most publications today focus on accuracy, and what everyone wants to know is whether the AI’s advice is good. But is it?
In one study, there were five real financial scenarios passed to major chatbots, and the output was compared to certified financial planners. The result was unsurprising, though. The bots reliably missed emotional and situational context, so personal decisions turned to rough spreadsheet logic that missed important input.
Sky News has conducted a similar test, where three chatbots were given £16,000 in real savings. What they found was that the recommendations were US-biased and incomplete.
Most alarming, it was an investigation which found Claude incorrectly described Binance as FCA-registered when advising a beginner on cryptocurrency. Binance was, in fact, ordered to cease UK-regulated activity back in 2021.
AI’s misleading outputs sound disturbing, but what is even worse is that it is only one part of the problem. Things get harder after the incorrect advice has already been given, acted on, and gone wrong.
So, when it happens, who takes the blame? Nobody is the answer, although it’s quite uncomfortable to hear.
The FCA has noted the same. In its 2026 report, the regulator confirmed that LLM platforms such as ChatGPT and Claude sit entirely outside its regulatory remit. This means that consumers using them for financial guidance are not receiving regulated advice. Therefore, they have no access to the Financial Ombudsman Service (or the Financial Services Compensation Scheme) if things go wrong.
That said, the safety net simply does not apply the moment consumers paste a question into a chatbot.
The regulatory gap explained
To understand why this gap exists, let’s understand how UK financial regulation actually works. The regulatory perimeter is activity-based, not technology-based. This means what matters most is what is being done, not how.
A firm that provides personalized recommendations on the purchase, sale, or holding of certain assets is engaged in regulated activity, regardless of whether those recommendations are provided by a person or an algorithm.
The problem is that AI chatbots occupy a new space. They are not marketed as financial advisers, so they don’t claim to be regulated. And technically, in most cases, they are not offering advice in the strict legal sense — they are responding to open questions.
Again, this ambiguity was addressed in the FCA report. The Mills Review highlights that AI platforms may influence consumers’ financial decisions without clearly implementing regulated actions. As a consequence, this creates a serious blank space between the actual financial impact and the protection provided by regulatory authorities.
The review’s main recommendation was for the FCA to officially revise the scope for receiving financial recommendations developed using AI tools. So, this process is ongoing, and further updates will be available only after a few months, or even more.
The consumer protection problem and what fintech can do
While there is no law so far protecting ordinary people, what should we do? Can fintechs close this gap, at least for now?
First of all, waiting for the FCA perimeter check to be completed is not a strategy. It’s better to start by separating information from personalization, especially if your company has an AI assistant.
The thing is that the boundaries of recommendations depend on whether the conclusion is adapted to the specific circumstances of a particular person. The tool that generally explains what an ETF is is in a completely different regulatory status than the one that says how much you should invest in funds.
Also, make sure the disclaimer does real work. The footer text “not financial advice,” located below a specific recommendation, will not pass regulatory checks. The FCA evaluates content, not form. If the output data looks like a personalized recommendation, the tiny disclaimers will not reclassify it.
Although many people use AI today, do not overuse it to earn trust. An analysis of more than 330 million reviews showed that mentions of interaction with AI are rated, on average, at just 1.7 points, compared to 3.7 points for reviews that do not mention AI.
Final words
Surely, there will be some people who continue to use AI directly for financial advice, and their number will grow. For them, I can say only one thing: be careful about who you trust with your earnings. If no one is accountable, maybe not treating it as a rulebook will save you from losses.
But fintechs should start building the accountable version of their business, with an audit trail and a human above the AI layer. So when the machine says “yes,” someone is actually standing behind that answer.
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Ask a UK bank for investment advice, and you get a lawful recommendation. If it was negligent, you will have the right to make a claim using the Financial Services Compensation Scheme. Ask ChatGPT, or, more fashionable, Claude, the same question and you get nothing. Just an answer, but it…
