AI financial advice can improve decisions or steer investors wrong, experiment finds
To what extent can AI improve our financial decisions or steer us in the wrong direction? Researchers at the University of Bayreuth investigated this question in a new study involving 3,700 participants and fictional investment fund savings plans.
Researchers at the University of Bayreuth conducted a study exploring the impact of artificial intelligence on financial decision-making. Using 3,700 participants and fictional investments, the study aimed to determine if AI could improve or mislead financial choices. The participants were asked to choose between two investment funds, both tracking the same index but differing in fees.
One option was consistently better than the other, with clear distinctions based on contribution levels. The study involved three types of advice: AI chatbots, bank-affiliated chatbots, and human financial advisers.
When AI provided accurate recommendations, the correct option was chosen by 87% of participants. Without any advice, 64% of the participants chose the better option. In contrast, if AI suggested the inferior fund, only 34% made the correct choice. Human advisers also influenced decisions, but their impact was less pronounced than that of AI.
Transparency regarding conflicts of interest did not significantly improve decision-making. The study showed that AI had a stronger influence on decisions compared to human advisers, regardless of the quality of advice. Higher investment amounts, greater financial literacy, and lower risk aversion correlated with better decision-making, even with AI assistance.
The findings underscore the potential of AI to enhance financial choices for those with limited knowledge while also highlighting the risks of biased AI recommendations.
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