AI chatbot gets green light to give buy, sell investment advice

An Israeli regulator has cleared an artificial intelligence startup to launch a chatbot that offers stock-picking advice in partnership with a large bank, even as other governments have raised alarms that AI might destabilize financial markets if used widely in investing.

Tel Aviv-based Bridgewise has been given the green light by the Israel Securities Authority (ISA) to release a chatbot called Bridget later this month that can offer recommendations for which stocks to buy and sell in response to user queries. The startup is working with one of the country’s largest banks, Israel Discount Bank, to roll out the product. It plans to expand to a second Israeli bank’s investment platform in the coming months.

The move represents a significant — and controversial — milestone for generative AI. While global financial institutions have increasingly embraced chatbots for research and customer service in the nearly two years since OpenAI launched ChatGPT, regulators have been wary of the risks of deploying this technology for retail investing.

Gary Gensler, chair of the US Securities and Exchange Commission, warned this month that there could be a financial crisis in the future if too many brokers and money managers relied “on the same model, the same algorithm, the same data.” Similarly, the European Central Bank said that using a handful of AI systems for investing decisions could cause “herding behaviour or bubbles.” As with many AI uses, there are also concerns that artificial intelligence can hallucinate — or make up information — in response to investor queries.

A spokesperson for the Israeli regulator said the approval came with restrictions. The tool cannot include advice “that is specific to the user,” for example, or have a conversation that appears to be “personal advice.”

The spokesperson directed Bloomberg News to correspondences between the agency and Bridgewise. In the exchange, the regulator laid down several other conditions for approval, including that the company offering such an AI tool must have an investment license, be compensated on a fixed rate rather than based on how well the investments do, and abide by basic conflict of interest rules.

Founded in 2019, Bridgewise uses AI trained on historical data combined with real-time news to provide investment analysis to brokerages, wealth advisors and exchanges, including the Nasdaq, the London Stock Exchange and the Tel Aviv Stock Exchange. The company said its new chatbot has taken years of work to develop and has gone through significant testing to ensure the advice is accurate.

“It’s ChatGPT, but with a financial edge,” said Gaby Diamant, chief executive officer of Bridgewise. “We've done everything in a calculated way, with the regulators involved end to end. Being the first to launch this has placed a huge burden on us.”

Investors can query the bot for recommendations on thousands of stocks, asking whether to sell Alphabet Inc. shares or find out which semiconductor stocks are its top Buy recommendations. In a test of a beta version of the tool, a Bloomberg reporter asked for the five best stocks to buy that day. The chatbot promptly responded with a list of five companies, including reasons for buying each.

Some popular general-use chatbots like ChatGPT will sum up risks and background information about companies, but stop short of providing investing picks. When asked by a reporter if they should buy or sell Alphabet stock, ChatGPT replied that it could not offer buy and sell recommendations.

Diamant said the risks in using the AI tool for buying and selling stocks are “similar to any investment decisions a trader makes on advice from any bank or trading entity.” When testing the chatbot, its responses included a disclaimer about the service’s limitations. “The information is not tailored to you specifically and is not a substitute for personal investment advice,” the disclaimer said.

Bridgewise is working on updates that include 12-month share price forecasts, earnings call transcripts and helping users build custom themed portfolios based on their preferences. Bridgewise also plans to roll out a service to retail users on a trading platform in Brazil, where it’s also working with local regulators. The startup declined to name the platform.