Israel approves AI chatbot for stock investment advice
TEL AVIV, ISRAEL — An Israeli AI startup, Bridgewise, has obtained regulatory approval from the Israel Securities Authority (ISA) to launch a stock-picking chatbot in partnership with Israel Discount Bank, one of the country’s largest financial institutions.
This decision marks a significant milestone in the integration of artificial intelligence into the financial sector despite concerns raised by other governments about potential market destabilization.
Bridget: The AI financial advisor
Bridgewise’s chatbot, Bridget, is equipped to provide users with buy-and-sell recommendations based on their inquiries.
Gaby Diamant, CEO of Bridgewise, described the chatbot as “ChatGPT, but with a financial edge,” emphasizing the years of development and rigorous testing that went into ensuring the accuracy of its advice.
“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,” Diamant added.
Founded in 2019, Bridgewise has not only partnered with major exchanges like Nasdaq and the London Stock Exchange but also tailored its AI technology to process vast amounts of historical data and real-time news. This enables the chatbot to deliver refined investment insights, distinguishing it from general-purpose AIs that shy away from specific financial guidance. For example, unlike ChatGPT, which refrains from providing investment picks, Bridget directly furnishes users with actionable buying or selling options.
Regulatory safeguards and expansion plans
The ISA’s approval comes with several restrictions to mitigate potential risks:
- The chatbot cannot offer personalized advice specific to individual users.
- Companies offering such AI tools must possess an investment license.
- Compensation must be based on a fixed rate rather than investment performance.
- Basic conflict of interest rules must be adhered to.
Bridgewise continues to enhance Bridget with features like share price forecasts and thematic portfolio customization. It also plans to expand its services to a second Israeli bank’s investment platform in the coming months. The company is also working on launching a similar service for retail users on a trading platform in Brazil, collaborating with local regulators.
Global concerns and future implications
While Israel embraces this AI-driven financial advisor, other regulatory bodies have expressed reservations.
Gary Gensler, chair of the U.S. Securities and Exchange Commission, warned of potential financial crises if too many brokers and money managers rely on similar AI models and algorithms.
Similarly, in its 2023 annual report, the Financial Stability Oversight Council (FSOC) stated that while AI promises benefits like efficiency and performance gains, its growing use in finance is a “vulnerability” needing monitoring. The report cautioned that it could also introduce cyber, model, and other safety and soundness risks. It advised regulators to adapt oversight mechanisms to account for the risks while enabling progress.
The European Central Bank has also raised concerns about the possibility of “herding behavior or bubbles” resulting from widespread use of AI systems in investment decisions.
As Bridgewise pioneers this new frontier in AI-assisted investing, the global financial community will be watching closely to assess the impact and potential risks of integrating artificial intelligence into retail investment advice.
