The Ontario Securities Commission (OSC) has published Artificial Intelligence and Retail Investing: Use Cases and Experimental Research (the Report), which discusses the results of a behavioural science experiment that focused on the role of artificial intelligence (AI) in supporting retail investor decision-making.
The experiment consisted of an online investment simulation to test how closely Canadians followed a suggestion for how to invest a hypothetical $20,000. 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.
Results of the experiment showed that participants who received the investment suggestion from a human using an AI tool (‘blended’) adhered to the investment suggestion most closely, although this difference was not significant. Notably, 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.
OSC researchers also examined the current investor-facing use cases of AI in Canada and abroad. In doing so, they 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 include AI systems that either facilitate or mitigate scams targeting retail investors scams capitalizing on the “buzz” of AI.
The Report details both benefits and risks from the first two use cases. For instance, 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. As AI-enhanced scams and frauds may pose significant risks to investors, the OSC continues to research its use, as well as ways to provide effective investor protection and potential mitigation strategies.
Artificial Intelligence and Retail Investing: Use Cases and Experimental Research is available for download from the website of the Ontario Securities Commission.
For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.
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