AI chatbots are rapidly transforming how Indian investors seek financial guidance, but this shift brings significant risks that many users fail to recognize. As these tools become more prevalent in investment decision-making, understanding their limitations and potential dangers becomes crucial for protecting your financial interests.

Growing Adoption of AI for Investment Queries

India has emerged as a major market for AI chatbot usage, representing 13.50% of ChatGPT's global user base according to Mary Meeker's Trends – Artificial Intelligence Report. This widespread adoption is reflected in the investment advisory space, where retail investors increasingly turn to AI tools for financial guidance.

Financial advisors are witnessing this trend firsthand. "Clients are coming with AI Chatbot screenshots to us and discussing the suggestions given by these platforms, increasingly," says Akshat Garg, head - research & product at Choice Wealth. Aditya Agarwal, co-founder of wealthy.in, notes that clients frequently reference conversations with popular platforms like ChatGPT or Gemini.

The Marketing Race for AI Visibility

As AI-driven channels gain prominence, brands are adapting their marketing strategies to rank within chatbot responses. Semrush predicts that AI-driven channels could rival traditional search in economic impact by 2027, with AI-powered visits converting 4.40 times higher than organic search.

This shift has prompted the development of Answer Engine Optimisation (AEO) and Generative Engine Optimisation (GEO) strategies. "To get your name picked up by AI answers, you first have to build trust using Google's E-E-A-T Framework… expertise, experience, authoritativeness and trustworthiness," explains Goutam Singh, a Noida-based AI SEO and digital marketing consultant.

Big Tech companies are making significant investments in the Indian market. Google has offered its $400.00 Gemini AI Pro free for 18 months to Reliance Jio's 500 million users, while OpenAI made ChatGPT Go free for a year in India, a plan previously priced at $54.00.

The Fiduciary Responsibility Gap

The most significant risk lies in AI chatbots' lack of fiduciary responsibility. Unlike SEBI-registered advisors, these tools operate without regulatory oversight or accountability mechanisms. "The problem with AI is bulk data-based recommendations. AI will pick up products that rank high on the internet without any context to an investor's need," explains Ravi Handa, founder and creator of Handa Uncle.

When investors ask for the 'best' mutual fund, the recommendations often reflect data availability, popularity, or marketing optimization rather than individual risk profiles or investment goals. This creates a dangerous disconnect between generic advice and personalized financial planning needs.

Regulatory Response and Gaps

SEBI has acknowledged AI's growing role in financial markets through its consultation paper on responsible usage of AI/ML in Indian securities markets. However, current regulations focus primarily on AI usage within regulated entities rather than standalone chatbot recommendations.

The Reserve Bank of India has issued warnings in its Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) report, stating: "When AI is used to enhance engagement, it can subtly influence consumer decisions in ways that may not always align with their best interests."

Appropriate Use Cases for AI Financial Tools

Despite the risks, AI chatbots can serve valuable educational purposes when used correctly. Financial experts recommend using these tools for:

• Learning basic concepts like mutual funds and SIP
• Understanding tax regime differences
• Simplifying complex financial articles
• Initial research and concept clarification

However, investors should avoid using AI for:

• Creating investment plans or portfolio allocation
• Making final investment decisions
• Calculating specific SIP requirements without verification
• Replacing professional financial advice

"It is okay to ask questions like what is mutual funds, what is SIP, old tax regime vs new tax regime etc," says Pramod Sharma, partner at Citrine Financial Services LLP. "But investors should strictly not ask AI chatbots to create an investment plan or portfolio allocation for them."

Expert Recommendations

Financial professionals emphasize the irreplaceable value of human advisory services. "The quality and timely handholding that an advisor/distributor provides to an investor is not replaceable," says Rushabh Desai, Founder at Rupee With Rushabh Investment Services.

For investors who choose to use AI tools, experts recommend treating them like search engines – informative but not decisive. Always verify AI recommendations through registered advisors or official scheme documents before making any investment decisions. The key is maintaining a clear distinction between AI as an educational resource and AI as a financial advisor.