OSC explores AI’s role in investment decision-making, highlighting opportunities and risks for investors
The Ontario Securities Commission (OSC) has published a new report titled ‘Artificial Intelligence and Retail Investing: Use Cases and Experimental Research,’ which reveals the results of a behavioural science experiment on AI's role in supporting retail investor decision-making.
The study involved an online investment simulation, where Canadians were asked to invest a hypothetical $20,000 based on a recommendation from one of three sources: a human financial services provider, an AI tool, or a human using an AI tool (referred to as a ‘blended’ approach).
Participants who received recommendations from the ‘blended’ approach adhered to the advice most closely, though the difference was not significant compared to the other groups.
Interestingly, no major difference was found in how closely participants followed advice from either a human or an AI tool, suggesting Canadians may be equally receptive to advice from AI systems.
“This research highlights the opportunities AI can create for Canadian investors and market participants,” said Leslie Byberg, executive vice president, Strategic Regulation at the OSC.
“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.”
The OSC report also explores three broad AI use cases in both Canadian and international contexts: decision support, automation, and scams/fraud. Decision support systems provide AI-driven investment recommendations, while automation involves AI managing portfolios or funds, such as ETFs.
The third category examines AI’s role in either facilitating or mitigating scams targeting retail investors, including frauds capitalizing on AI-related hype.
The report outlines the benefits and risks of decision support and automation. While AI can offer more affordable investment advice, there are risks of biased, irrelevant, or inaccurate recommendations.
Additionally, AI-enhanced scams and fraud present significant risks to investors. The OSC continues to investigate these issues and develop strategies to mitigate potential harm, focusing on maintaining strong investor protections.
