An Israeli authority has authorized an artificial intelligence startup to introduce a Chatbot that provides stock-picking advice in collaboration with a major bank. This approval comes amidst concerns from various governments about the potential destabilization of financial markets due to widespread AI use in investing.
Bridgewise’s Innovative Chatbot
Bridgewise, based in Tel Aviv, received the go-ahead from the Israel Securities Authority (ISA) to launch its chatbot, named Bridget, later this month. This tool will deliver stock recommendations in response to user inquiries. The startup is partnering with Israel Discount Bank, one of the nation’s largest banks, to launch the product, with plans to expand to another bank’s investment platform shortly thereafter.
Bridgewise’s chatbot, Bridget, shows promise for enhancing investment accessibility through tailored stock recommendations, according to wsj discount.
A Milestone for Generative AI
This development marks a pivotal and contentious milestone for generative AI. Over the past two years, following the introduction of ChatGPT by OpenAI, global financial institutions have increasingly adopted chatbots for research and customer service. However, regulators remain cautious about the implications of employing this technology in retail investing.
Regulatory Concerns
Gary Gensler, chair of the U.S. Securities and Exchange Commission, cautioned this month that a financial crisis could emerge if numerous brokers and money managers depend on “the same model, the same algorithm, the same data.” Similarly, the European Central Bank warned that relying on a limited number of AI systems for investment decisions could lead to “herding behavior or bubbles.” Concerns persist regarding AI’s potential to “hallucinate” or fabricate information in response to investor inquiries.
Approval Conditions
A representative from the Israeli regulator noted that the approval includes specific restrictions. The tool is prohibited from providing advice that is “specific to the user” or engaging in conversations that could be construed as “personal advice.” The spokesperson referred Bloomberg News to communications between the agency and Bridgewise, outlining additional conditions for approval. These include requirements that the company providing the AI tool must possess an investment license, be compensated at a fixed rate rather than based on investment performance, and adhere to fundamental conflict of interest guidelines.
About Bridgewise
Founded in 2019, Bridgewise utilizes AI trained on historical data and real-time news for investment analysis. Their clients include brokerages, wealth advisors, and exchanges like Nasdaq and London Stock Exchange. Additionally, they serve the Tel Aviv Stock Exchange, enhancing investment strategies. The development of their new chatbot has spanned several years, showcasing dedication to quality. Extensive testing was conducted to ensure the accuracy of the advice provided by the chatbot.
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CEO’s Perspective
It’s ChatGPT, but with a financial twist,” said Gaby Diamant, CEO of Bridgewise. “We’ve approached this methodically and deliberately. Regulatory involvement has been crucial at every stage of development. Being the first to launch this initiative is significant. It carries a considerable amount of responsibility.
User Experience and Future Plans
Investors can request recommendations from the bot for thousands of stocks, asking whether to sell shares of Alphabet Inc. or which semiconductor stocks are top Buy recommendations. In a test of a beta version, a Bloomberg reporter requested the five best stocks to buy that day. The chatbot swiftly provided a list of five companies, along with reasons for each recommendation.
While popular general-purpose chatbots like ChatGPT can summarize risks and background information about companies, they have limitations. They typically refrain from offering specific investment picks to users. When a reporter inquired about buying or selling Alphabet stock, ChatGPT responded. It indicated that it could not provide buy or sell recommendations due to regulatory constraints.
Diamant asserted that the risks of using the AI tool for stock trading are comparable to investment decisions traders make. He stated these decisions are often based on advice from banks or trading entities. During testing, the chatbot included a disclaimer regarding its service’s limitations. It noted that “the information is not tailored to you specifically and is not a substitute for personal investment advice.”
Upcoming Features
Bridgewise is also developing updates that will incorporate 12-month share price forecasts, earnings call transcripts, and assistance in creating custom-themed portfolios based on user preferences. Additionally, the startup plans to introduce a service for retail users on a trading platform in Brazil, where it is engaging with local regulators. The specific platform name remains undisclosed.
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