The Financial Conduct Authority chief executive Nikhil Rathi has said artificial intelligence (AI) can play a role in “tackling the advice gap”.
He explained “more accurate information delivered to everyday investors” could result in “not just the wealthiest customers who can afford bespoke advice”.
Rathi made these remarks in a speech at the Economist Impact Finance Transformed event on 12 July 2023.
While the UK had the lowest annual growth in worker productivity during Q1 this year (2023) and over the past decade, AI could improve this Rathi said.
He cited a study in April by the National Bureau of Economic Research (NBER) in the US that found that productivity was boosted by 14% when over 5,000 customer support agents used an AI conversational tool.
Rathi suggested other ways AI can benefit financial services such as the creation of “hyper-personalised” products alongside tackling fraud and money laundering.
There are firms in the advice sector that have already started to embrace AI.
In June 2023, Aveni, the AI fintech business announced the release of a new platform, Aveni Assist.
It aims is to enhance the productivity of an adviser by up to three times.
Aveni Assist, the AI assistant, has been designed specifically for the financial advice market to transform administrative tasks.
The firm’s chief executive Joseph Twigg told Money Marketing that “Aveni Assist is the very start as we are wrapping AI around the human adviser”.
Rathi also said depending on who you speak to AI could end the world or cure cancer but the FCA is determined to put the “right guardrails” in place so this does not happen.
In June 2023 prime minister Rishi Sunak said he wants to make the UK the home of global AI safety regulation.
Rathi said the FCA “stand ready to make this a reality for financial services”.
When discussing who is responsible for policing AI, Rathi said: “FCA does not regulate technology, we do regulate the effect on – and use of – tech in financial services.”
He added: “International and industry collaboration is key on this issue, and we stand ready to lead and help make the UK the global home of AI regulation and safety.”
But a balance must be struck as any regulation must be “proportionate enough” to foster beneficial innovation yet robust enough to avoid a race to the bottom.
He also addressed Big Tech as the FCA also published its feedback statement on Big Tech in Financial Services.
The regulator announced a call for further input on the role of Big Tech firms as “gatekeepers” of data and the implications of developing “data-sharing asymmetry between Big Tech firms and financial services firms”.
The FCA is also looking into the risks that Big Tech may pose to operational resilience in payments, retail services and financial infrastructure.
Rathi also revealed that partnerships with Big Tech can offer opportunities “by increasing competition for customers and stimulating innovation”.
But he warned that the FCA need to test further whether the “entrenched power of Big Tech could also introduce significant risks to market functioning”.
One area Rathi said the regulator wants to focus on is third-party cloud-service providers.
He said: “We must be clear where responsibility lies when things go wrong. Principally this will be with the outsourcing firm, but we want to mitigate the potential systemic impact that could be triggered by a critical third party.
“Together with the Bank of England and PRA, we will therefore be regulating these critical third parties – setting standards for their services – including AI services – to the UK financial sector. That also means making sure they meet those standards and ensuring resilience.”
Money Marketing looked at the issue of critical third-parties in the July cover story of the magazine.
It looked at the advice sector and cyber security.
