26th June 2025

Consumer Duty & Artificial Intelligence

Well, how about starting an article with the two most trendy watchwords. What on earth can I write that has not already been covered – several times? 

We probably need to remember that there is very little new under the sun. After all, people have been acting very sustainably for years when they hang out their washing to dry using wind and solar power. 

It is interesting to consider how Consumer Duty has changed the practices of many firms and seems to have made little difference to some firms. One of the firms that I work with recently said that it simply brought other firms up to the standards that it has been practicing for years. 

Consumer Duty has given firms the opportunity to review:

• how they work, 
• what they charge and 
• the value of their client bank.  
• It has made firms focus on maximising the opportunity for their clients to pursue their objectives. 
• This is strengthened by firms now being more aware of different vulnerabilities that clients may suffer from time to time. The recognition of vulnerability is the first step, but how the advisers address the issues is most important. 
• The importance of regular contact with their clients. Carrying out reviews of the ongoing suitability of advice that has been given. 

Since advisory firms have been receiving trail commission or latterly adviser fees to look after clients, why have they not been giving value to their clients?  

The FCA has been trying to get clients to behave with integrity with the clients’ best interests at heart. Over the years, it has tried:

• Treating Customers Fairly – setting out a framework of best practices
• Retail Distribution Review – introduced higher minimum qualification and tried to get rid of commission
• Markets in Financial Instruments Directive 1 & 2 – little effect in UK, but tried to bring European standard up to level already prevalent in the UK
• Senior Managers and Certification Regime – to introduce accountability for senior management, passing the registration of advisers and others back to firms. 
• Consumer Duty – to focus on client objectives, greater emphasis on dealing with vulnerable clients and undertaking regular reviews. 

I was pleasantly surprised to see a certain joined up thinking that the Consumer Duty built onto the Conduct Rules. I guess it comes back to there being nothing new under the sun.

In order to enhance the services that Financial Services firms offer to clients, we need to look at how we can work smarter, not harder.  As technology develops, we should look to see how it can be used to improve our capabilities.

Artificial intelligence (AI) has been part of our life for a long time and now increasingly so.   

All of our files used to be stored in paper form.  There are still some firms that keep too much paper and use too much paper. We have never achieved the paperless offices that we were promised in the 1980s. But most of our keep for records in digital form in our computers or on servers.  

We have used passwords to get into systems and even premises for ever. But things have moves on a little bit with two-factor authentication. Even safer, face recognition and biometrics.  These are all data protection tools that are becoming more sophisticated with time.  

However, the applications of AI are far reaching in industry and medical professions. They enable more accurate interpretation of data and information.  

In financial services, we are beginning to harness the power of AI. Again, it is the interpretation of data and information. But since the technology is fairly new, it is constantly building up the data banks. We need to be careful about checking the source of the information that has been put in front of us by our AI. 

I was preparing a report on sustainable investment and thought I would get some quick information using CoPilot. I asked for a list and description of the Sustainable Disclosure Requirements. A few seconds later CoPilot produced a list three (3) SDRs with nice little descriptive paragraphs. I then put in “there are four (4) labels. Then in another few seconds it said – “you are right, there are four (4) labels” and neatly set out the 4 labels with descriptions as before.  So, just because the computer has told us, we still need to check the information. Perhaps we should only ask questions where we already know the answers!

The FCA is keen for advisers to embrace AI wherever possible and has recently The Financial Conduct Authority (FCA) is launching a Supercharged Sandbox to help firms experiment safely with AI to support innovation.

Through a new collaboration, announced this month, firms will have the opportunity to experiment with AI using NVIDIA accelerated computing and NVIDIA AI Enterprise Software.

This Supercharged Sandbox will give firms access to better data, technical expertise and regulatory support to speed up innovation. It is open to any financial services firm looking to innovate and experiment with AI.

The sandbox will help firms who are in the discovery and experiment phase with AI. An existing AI Live Testing service helps those further along in development and ready to use AI. In its new strategy, the FCA has committed to supporting economic growth by enabling innovation and harnessing technological advances like AI.

At least two of my advisory firms are using AI within their advice process. They are recording their meetings. The meetings are better flowing as the advisers can concentrate on speaking with the clients and not being distracted making notes. After the meeting, the AI transposes the conversation as a record of the meeting.  The AI then produces a summary of the meeting with actions points. The AI can then produce a message to the clients with as much information as the adviser wants to give. 

It has been noted that the AI is able to scrape more of the information from the meeting. Often, more than the adviser would have remembered. Detail down to picking up vulnerabilities, client opinion and most particularly prioritising client objectives. 

This obviously increases the accuracy of information that the adviser has and should in turn lead to better service to the client. This is not replacing the adviser but assisting them in their business. The future of financial advice.  

In the future, the editors might ask AI to produce an article in the style of Tony Catt. But who would want to read that?

Tony Catt 

Compliance Consultant 

The Catt’s Eye View

07899 847338 

Business Development