- Investors need to be aware of ‘AI-washing’ – designed to give a bump to share prices
- Similar concerns over IFAs and wealth managers trying to take advantage of AI ‘halo effect’
- SEC in the US previously charged investment advisers for making false and misleading claims about artificial intelligence
- 3% of companies label ‘AI’ as a risk in 2023/24
The number of UK companies that have issued statements to their shareholders that include the promoting their use of ‘AI’ has increased 75% in the past year, from 320 in 2022/23, to 560 in 2023/24 (year-end April 8) as concern rises over ‘AI-washing’, shows new research from Bowmore Financial Planning.
Bowmore says that whilst AI is going to give many companies huge competitive advantages investors also need to be wary of ‘AI washing’. That is where companies overplay their usage of AI in the hope it will create a ‘halo effect’ and improve the company’s share price.
UK listed companies that have promoted their use of ‘AI’ in their announcements to investors in 2023/34 include oil giant BP, insurers Aviva and Hiscox, retailer Marks and Spencer and gaming group 888 Holdings.
The increase in company announcements related to AI comes after the dramatic outperformance in the share price of the “Magnificent Seven” in the US. This outperformance has been attributed to leadership in AI that those companies are thought to have.”
Mark Incledon, Company Chief Executive Officer at Bowmore Financial Planning, says: “AI washing presents a risk for investors. Not all the players in AI are going to be winners and many companies that are talking up their AI usage risk misleading investors if they overplay their hand.”
“AI washing is also a problem in the wealth sector with IFAs and wealth managers overplaying their usage of AI in stock picking or broader asset allocation.”
In the US the Securities and Exchange Commission (SEC) has charged two investment advisers for making false and misleading statements on their use of AI. Both firms were fined $400,000 in civil penalties.
Bowmore says that AI does present substantial opportunities for advisory and wealth management firms to improve the level of service to clients. The current uses of AI technology in financial advice range right through from ancillary tasks, such as generating meeting notes and onboarding client data to more complex tasks such as generating advice and stock picking.
560 companies promoting their use of ‘AI’ in their announcements in 2023/24 – 75% increase on previous year
*Source: London Stock Exchange
**Source: US Securities and Exchange Commission – March 2024