Artificial intelligence( AI) is becoming increasingly prominent in financial services. It has the potential to transform the way firms serve their clients and increase access to financial services. There has already been plenty written about the benefits and drawbacks of AI and how its use could impact financial planning firms. But what is the FCA’ s stance on these developments? And how could AI play a part in a changing advice landscape under the Advice Guidance Boundary changes?

Well the FCA has published various updates already on AI and in short has stated it supports the‘ safe and responsible adoption of AI in UK financial markets’. The regulator goes on to confirm that it does not intend to introduce extra regulations for AI, and will instead rely on existing frameworks to mitigate risks associated with AI. So what existing frameworks are being referred to? We outline below four key actions for any firm looking to adopt an AI tool in a way that could influence client outcomes.

Threshold conditions

The threshold conditions are governing pillars which underpin a firms regulatory status. This includes that a firm’ s business model must be suitable and have adequate‘ nonfinancial resources’, i. e. in other words senior management have the necessary skills and competence to understand the AI tool and how it operates.

Action: Take time to understand how the tool works, and carry out due diligence to reassure around safeguards and operation of the tool.

Consumer Duty

We have a regulator that is increasingly principles-based. This includes the long-standing‘ Principle 2’ that firms must conduct their business with due skill, care and diligence and take‘ Principal 3’ that firms must take reasonable care to organise and control their affairs responsibly, effectively and with adequate risk management systems. This has been added to in recent times by

Sandy McGregor, Director of Policy, Simplybiz

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