The FCA’s AI vision – opportunity for advisers or a threat to advice?

As we get closer to the 19th September deadline date for responses to the FCA’s DP 25/2 on the future of the mortgage market, I have been revisiting the paper and seeking to glean from it some information, or indeed a thread, on what the regulator sees as the future of advice and technology’s role in it.

Of course, perhaps unsurprisingly, there is a lot written in the DP about AI-usage, but this is from the perspective of the regulator, not firms active within the industry, and that is a major (potential) point of difference.

What struck me after a re-read is how frequently the FCA refers to ‘firms’ telling it how much they want to innovate with AI-assisted sales journeys, but it never tells us who these firms are. You, however, can hazard a guess.

If advisers represent a community where more than 90% of sales are already advised, and where AI is much more likely to be embraced as a time-saver and compliance helper rather than a wholesale replacement for professional judgement, then it’s hard to believe we’re the ones pushing hardest for AI to ‘disrupt’ the advice process.

Lenders, on the other hand, have every incentive. The removal of the ‘interaction advice trigger’ this summer is already a case in point. Put those two together – lender appetite for slicker direct journeys, and regulatory encouragement/capitulation for greater execution-only usage – and suddenly advisers find themselves in a very different place.

One where AI is not necessarily a neutral ‘efficiency tool’ for advisers, but a lever for lenders to grow their direct business, under the reassuring label of ‘innovation’.

That is what should be giving our sector pause for thought. Because if the FCA chooses to interpret ‘AI usage’ in this way, then we should all expect far more aggressive pushes by lenders for direct business.

Of course, the FCA is right to recognise AI can bring benefits. Automated document handling, streamlined fact-finding, improved compliance record-keeping, personalised communications that help clients actually understand their mortgage choice, for example.

They free advisers up to do what they do best: interpret, contextualise, and deliver holistic advice that meets Consumer Duty requirements in full.

But those adviser-centric benefits are not what the DP lingers on. Instead, the language is about enabling ‘AI-assisted advice and sales’, about improving eligibility checks and acceptance likelihood.

On one level, there’s nothing wrong with that – consumers of course want clarity early in the process. But dig a little deeper and the emphasis feels less about adviser support and more about building confidence that execution-only can be done safely. That is not a direction of travel the advice profession should simply nod through.

If execution-only journeys are made ‘smoother’ and ‘lower risk’ for lenders because AI is deemed enough to run the checks, then the value of professional advice risks being diluted. Worse, consumers may be led to believe that an algorithm’s approval is equivalent to human judgement about what is suitable for their unique circumstances. We know that isn’t true.

So what should the profession do? The first step is to challenge the FCA’s narrative that ‘firms’ want this shift. Advisers must make clear that when we talk about AI, we mean using it to support the advice process, not to bypass it. We need to ensure the regulator understands the distinction between AI as an adviser-enabler and AI as an execution-only escalator.

That’s why initiatives like our recently-launched survey on AI are important. We want to capture how advisers are actually using – or wanting to use – these technologies. We are seeking views on the opportunities, the challenges, and the potential risks. Crucially, it’s about hearing the adviser’s voice, not just accepting what the regulator or lenders tell us is happening, or what is required.

This matters because if advisers do not articulate their perspective, the debate risks being shaped exclusively by those who benefit most from loosening the boundaries around advice. Advisers’ competitive strength lies in quality of service, holistic planning, and trust. If regulation shifts to make it easier for consumers to bypass advice under the comforting banner of AI – and we’ve already seen this happen – then the adviser community could find itself playing catch-up.

In the next week or so, as the deadline for responses to the DP approaches, we would urge advisers to engage both with the FCA’s DP and our survey. One speaks to the regulator, the other ensures the broker community itself has the data and insight to push back against any one-sided framing of AI’s role.