How AI Influences Financial Decisions

Led by Prof. Dr. Fabian Herweg, Chair of International Competition Policy at the University of Bayreuth, the researchers presented participants with a simple yet realistic decision. Participants were asked to set up a savings plan based on a fictional stock market index and then choose between two fund providers. Both funds tracked exactly the same index but differed in two separate fees.

"This created an apparent trade-off in our study: each provider was cheaper with respect to one of the two fees," says Professor Herweg. "As a result, it was not immediately obvious which provider offered the better overall deal. In reality, however, for every chosen contribution level there was one provider that was clearly superior, meaning it was always the cheaper option overall."

Participants either made this choice on their own or with support from one of three advisory options: an AI chatbot, a bank-affiliated AI chatbot, or a human financial adviser. The researchers controlled these advisory options so that they either provided the correct recommendation or a biased one. The online study was fully incentivised, meaning that participants received higher payments when they made better investment decisions.

"Our findings show that AI can provide substantial support in decision-making, but only when its advice is correct. Equally, it can strongly steer people in the wrong direction if its recommendations are biased," says Joshua Greubel, research associate in the  University of Bayreuth’s International Competition Policy research group.

Without any advice, around 64% of participants selected the better provider. When a neutrally presented AI chatbot recommended the better option, this figure rose to approximately 87%. However, when the same AI was instructed to recommend the inferior provider, the proportion of correct decisions fell to around 34%.

The study also found that disclosing conflicts of interest offered little protection against poor decisions. One of the chatbots was explicitly presented as a “bank AI”, and participants were informed that the bank could benefit financially from their savings-plan choice. Nevertheless, this did not measurably reduce the chatbot’s influence. More broadly, AI proved more persuasive throughout the study than human financial advisers.

"Whether the advice is good or bad, AI influences decisions more strongly in the intended direction than human advisers do," says Henrik Guhling, also a research associate in the  University of Bayreuth’s International Competition Policy research group

This difference in trust became particularly evident when the researchers examined the size of participants’ fictional investments. Participants choosing lower investment amounts selected the better provider in only around 28% of cases when making decisions without advice. Good AI advice increased this figure to more than 74%, while advice from the bank AI raised it to over 85%.

Participants opting for larger investment amounts generally displayed higher levels of financial literacy, somewhat greater financial experience, and lower risk aversion. More than 87% of this group made the correct choice without any advice. However, when they received a misleading AI recommendation, the proportion of correct decisions fell to below 50%.

This suggests that AI can not only help individuals with limited financial knowledge make substantially better decisions, but can also persuade financially capable individuals to abandon choices they would otherwise have made correctly.

"High-quality AI advice can provide enormous support for people who lack the relevant financial knowledge. At the same time, biased AI recommendations can discourage even those who would otherwise have made excellent decisions on their own from choosing the best option," says Greubel.

"Simply being transparent about the use of AI is therefore not enough. What ultimately matters are the objectives built into the AI system and the economic interests behind it. Providers should be required to ensure that AI-based advice is consistently aligned with customers’ interests and safeguarded through appropriate monitoring and auditing mechanisms," says Professor Herweg.