FCA calls for "clear" warnings on AI-generated financial advice

In a speech today at the Bloomberg UK Policy Series, Jessica Rusu, FCA chief data, information and intelligence officer, called for AI providers to put "clear, proportionate and consistent disclaimers" on financial advice generated by large language models (LLMs) such as ChatGPT, Gemini and Claude.

"AI will redefine financial services," Rusu said. "Done well, AI can increase productivity, improve competition, services and drive economic growth."

"The FCA wants the UK to be at the forefront of the safe adoption of AI in financial services."

However, Rusu noted that AI is currently impacting "what happens before a consumer ever reaches a regulated firm," leading boundaries to become blurred "between regulated and unregulated activity, and the protections consumers receive."

Just 40% of consumers receiving AI-generated financial advice can recognise that there is no recourse if something goes wrong, despite 4 in 5 less-experienced investors between the ages of 18 and 40 having used AI to help with investing.

"Our answer is not simply to expand our remit, but to make the existing boundary clearer," she said.

The FCA currently employs InvestSmart and the FCA Firm Checker to help consumers better understand what protections they have, but Rusu said that "warnings may be more effective at the point where AI-generated financial information is delivered."

As a result, the FCA is calling for warnings on AI-generated financial advice to "help consumers understand the limits of financial information and advice" issued by these models.

This speech comes on the same day that the FCA published a new paper, AI in financial services: good practice and areas for improvement, designed to "support the safe and responsible adoption of artificial intelligence (AI) in financial services."

"Protecting consumers starts with how firms deploy AI," Rusu said of the paper, adding that "three things stand out: consumer centricity, accountability and governance, and operational resilience."

Cormac Bradley, senior actuarial director at Broadstone, commented: "AI has the potential to transform financial services by helping firms cut costs by improving efficiency and delivering better, more personalised outcomes for customers. But as its use accelerates and the technology becomes increasingly embedded across the industry, firms must ensure that innovation does not come at the expense of consumer protection.

"The FCA's findings are a timely reminder that AI is not a regulatory free pass. While the regulator is rightly keen to encourage innovation, firms must have robust safeguards in place, with clear accountability and proper controls to manage the risks associated with increasingly sophisticated and autonomous technology.

"AI deployment is impacting many functions within insurers’ business models, across the full spectrum of front and back office, each of which introduces different types of risks. AI governance will have to distinguish between these use cases and introduce appropriate controls and risk management for each.

"The FCA’s paper on good practice and areas for improvement highlights the importance of these where AI can impact on Consumer Duty, particularly where it is being used to inform decisions that could have significant financial consequences for customers.

"Ultimately, the challenge for financial services firms is to strike the right balance between embracing AI and managing its risks. Those that get this right will be best placed to harness the technology's enormous potential, improve customer experiences and build the trust and confidence needed to drive wider adoption across the industry."

Amal Jolly, CEO of Saturn, said: "People could make irreversible financial decisions that cost them money and put their families’ financial futures at risk.

"Our research paper, Artificial Authority, found that AI chatbots are giving out inaccurate financial advice 57% of the time. They make errors, their responses are inconsistent, and there is no clear route to redress for people misled by their outputs.

"Unlike traditional search engines, AI chatbots don’t just provide information. They generate personalised, tailored responses that people increasingly rely on to make decisions. With personal AI agents, the future is autonomous, where these systems will not just advise but act on people’s behalf. The regulator needs to catch up with the technology and the potential harm to consumers.

"The FCA is right to embrace AI innovation, but consumer protection must evolve just as quickly. If AI is effectively guiding people’s financial decisions, it needs appropriate regulatory oversight, clear accountability and meaningful consumer protections.

"Simply asking big tech companies to put disclaimers on their AI-generated financial advice is not enough. The regulator and government need to act before consumers suffer serious harm."