AI-driven financial advice is becoming increasingly popular in the UK, with more than a quarter of consumers expressing trust in AI chatbots for money-related guidance, according to the Financial Conduct Authority (FCA). Other surveys suggest even higher levels of engagement, with one report indicating that 55% of UK adults have used AI for financial guidance, while another found 40% have done so. Among younger generations, such as Gen Z, the figure jumps to 68%, according to a global study by EY. This growing reliance on AI for financial decisions highlights a shift in how people seek and receive financial advice. However, the FCA has raised concerns about the risks involved. Unlike traditional financial advisers, AI chatbots such as ChatGPT and Claude are not subject to the same regulatory standards. UK banks are legally required to provide lawful investment recommendations and offer compensation if they make mistakes. In contrast, AI chatbots are not considered to be offering regulated advice. The FCA has confirmed that large language model (LLM) platforms are not within its regulatory scope, meaning users of AI financial tools are not protected by the Financial Ombudsman Service or the Financial Services Compensation Scheme if issues arise. The FCA's regulatory approach is based on the activity being performed, not the technology used. If a firm provides personalized recommendations about buying, selling, or holding financial assets, it is considered a regulated activity, regardless of whether the advice comes from a human or an algorithm. However, AI chatbots are not marketed as financial advisers and do not claim to be regulated. They are technically responding to questions rather than offering formal advice, which places them outside the strict legal definition of providing financial guidance. Studies have shown that AI chatbots can struggle to account for emotional and situational factors in financial decisions. In one test, five real-life financial scenarios were presented to major chatbots, and the results were compared to advice from certified financial planners. The chatbots consistently failed to consider the emotional and personal context involved. In another test, Sky News found that chatbots provided recommendations that were biased toward the US market and incomplete. One alarming case involved a chatbot incorrectly stating that Binance was FCA-registered, despite the firm being ordered to stop UK-regulated activities in 2021. Experts warn that the growing use of AI in financial advice creates a gap between the impact of these decisions and the protections available to consumers. The Mills Review emphasized the need for clearer regulations to ensure that AI platforms do not influence financial decisions without proper oversight. While no laws currently protect users from the risks of AI financial advice, some fintech companies are encouraged to build more accountable systems, including clear audit trails and human oversight. The FCA is currently reviewing its regulatory framework, but waiting for final guidelines may not be the best strategy. Companies using AI assistants are advised to separate general information from personalized recommendations and ensure disclaimers are meaningful and not just formalities.