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News Junction > Blog > Business > UK’s Investment Association warns of ‘trading bot’ risk to investors
UK’s Investment Association warns of ‘trading bot’ risk to investors
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UK’s Investment Association warns of ‘trading bot’ risk to investors

Published February 2, 2024
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The UK’s Investment Association (IA) has warned investors about the risks of using ‘trading bots’ to make investment decisions.

Speaking to the BBC John Allan, head of innovation and operations at the IA said investors should be more cautious about using AI.

“Investment is something that’s very serious, it affects people and their long-term life objectives,” Alan said. “So being swayed by the latest craze might not be sensible.

“I think at the very least, we need to wait until AI has proved itself over the very long term, before we can judge its effectiveness. And in the meantime, there will be a significant role for human investment professionals still to play,” he added.

The news comes as recent research shows that almost one in three investors would be happy to let a trading bot make all the decisions for them, according to one 2023 survey in the US.

Generative AI can also simply just go wrong, and produce incorrect information, something termed a “hallucination”, says Prof Sandra Wachter, a senior research fellow in AI at Oxford University.

“Generative AI is prone to bias and inaccuracies, it can spit out wrong information or completely fabricate facts. Without vigorous oversights it is hard to spot these flaws and hallucinations.”

Prof Sandra Wachter also warns that automated AI systems can be at risk of data leakage or something called “model inversion attacks”. The latter – in simple terms – is when hackers ask the AI a series of specific questions in the hope that it reveals its underling coding and data.

Security expert Oseloka Obiora, CTO, RiverSafe said: “The risks of engaging AI-enabled trading bots to make investment decisions aren’t just financial, they could include also major security ramifications if the technology is compromised. We know that accessing and manipulating AI is a top priority for hackers who are constantly on the lookout to steal personal data and create havoc by manipulating markets.

“It’s important that sound financial decisions are taken by consulting several sources, not just relying on the latest algorithm, so a cautious approach remains the best way forward for institutional and individual investors alike,” added Obiora.

Derek Mackenzie, CEO, Investigo, part of The IN Group, commented: “AI will continue to have a seismic impact on the financial services industry, transforming traditional trading and investment processes beyond all recognition. Whilst many firms have been quick to investigate and adopt new technologies, far too many have been slow to secure the necessary talent pipeline to nurture and improve it. Without a team of highly skilled AI specialists in place, many organisations will find themselves facing serious challenges when things go wrong, or upgrades are needed to ensure AI algorithms are operating correctly.”

Meanwhile, Khalid Talukder, co-founder, DKK Partners said: “AI is here to stay, so those campaigning against its adoption should wake up and smell the coffee. When it comes to relying on it for trading and investment decisions, it’s important that these tools are viewed as one aspect of a much wider decision. Investors can and should use bots to source advice but relying 100% on an algorithm without any additional research could lead to disastrous consequences. Investors should see AI as another useful l tool, that can be added to the mix alongside risk profiling and market knowledge, and not an infallible guide to getting rich quickly.”

#UKs #Investment #Association #warns #trading #bot #risk #investors

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