The UK's personal financial services market has long grappled with providing effective support beyond those who can afford fully-fledged financial advice.
The FCA’s Advice Guidance Boundary Review seeks to address key areas - providing clarity to financial firms in supporting consumers without crossing into regulated advice, enabling targeted support for similar consumer groups, and creating a simplified advice regime to improve access to advice. While the FCA maintains a technology agnostic approach, they recognise AI's transformative role in financial services. They expect firms to responsibly integrate AI while adhering to existing principles, managing risks, and ensuring consumer protection. The FCA itself is leveraging AI for regulatory purposes and supports AI-driven innovation through initiatives like the Regulatory Sandbox.
Reducing the cost of advice through innovation
Based on our experience as a technology provider of adviser tools and digital advice, costs can be reduced by 66% for at-retirement income advice, with consumer satisfaction remaining high. With improved integration, this 66% reduction could rise to over 80%.
The most significant efficiency gains come from automating advice production and suitability reports, with carefully constructed algorithms handling most mass-market cases.
AI-Driven Innovation
Large language models (LLMs) and avatars are already revolutionising financial advice and being used to answer consumers' questions in real time, perform complex calculations instantly, and explain modelling results in an engaging, conversational way. This interactive, AI-driven approach is proving to be a more effective and engaging way than traditional static information delivery.
Opportunity with retirement advice
The FCA appears to have ruled out retirement decumulation advice from the simplified advice framework - despite this being an area where consumers arguably need the most guidance. Instead of waiting for further developments in simplified advice regulations, our focus is on re-engineering the entire financial planning and advice experience. Our goal is to make comprehensive guidance and advice both more accessible and affordable for consumers across all stages of their financial journey.
Each firm can deploy automation differently:
It’s crucial to note that the FCA expects firms using AI to identify, assess and manage associated risks. This aligns with responsible innovation practices and ensures consumer protection remains at the forefront. Something we adhere to in everything we do.
Looking Forward
While the FCA continues its deliberations, including planned consultations on targeted support and retail investments, the technology to transform financial planning and advice exists today. By combining robust calculations with innovative delivery methods, we're creating the capabilities you need for guidance and advice in today’s hybrid advice market and tomorrow’s multichannel market - not just another fragmented digital advice solution.
The FCA’s ongoing monitoring of AI and machine learning usage in UK financial services supports the case for proactive innovation. While regulatory frameworks continue to evolve, firms can innovate responsibility within the existing regulatory landscape.
Why wait for regulation when we can innovate together?
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*Footnote: The original version of this article was published in January 2025 in Money Marketing.