How AI helps advisers navigate Consumer Duty

Read this article to understand:

• Why AI doesn’t simply compete with advisers but can expand the whole investment market
• How AI can help build relationships with clients 
• How King’s Business School’s free course can help you understand the new world of AI and financial advice
   

The Consumer Duty rules require firms to put their customers' needs first, including when using artificial intelligence (AI) and robo-advisers. King’s School’s free course - Consumer Duty in an Age of AI and Sustainability - helps advisers understand how to use AI to maximise efficiency and build relationships with clients while meeting Consumer Duty requirements.

Why AI can be an ally rather than a threat

Advisers may regard clients’ use of AI and robo-advisers as a threat. Instead of worrying, advisers should also embrace the benefits AI can bring. In many cases AI doesn’t compete with advisers but expands the whole investment market.

For example, the first part of the course explains how AI solutions in the US are attracting people with smaller savings. The evidence suggests that people who adopt robo-advisors and other automated solutions may see positive results. Studies¹ show that robo-advice can lead to:

• less time spent managing investments
• better spread of investments and improved economic welfare
• less biased decision-making
• better performance in downturns

These findings suggest robo-advice can deliver benefits for some consumers. Broader access to investment services may support greater financial inclusion. Moreover, as their wealth grows, clients may well turn to the services of human advisers.

How AI can help you build relationships with clients

Many people want their savings to make a positive impact, but only a few invest in sustainable options. This may be because in the UK, around 23 million consumers are currently underserved by the markets for advice and guidance, according to the Financial Conduct Authority.² In the automated space, sustainable options are still catching up, suggesting financial advisers have a significant role to play in this area too.

To give good advice and help clients succeed, you need to understand their goals and preferences, including their views on sustainable investments. And as we learn in the second module, the role that AI can play here may come as a surprise to many advisers. That’s because AI not only streamlines back-office operations, it can also gather information on clients. That ability can help you build a personal rapport, resulting in a smoother conversation as you understand your clients better, as well as an improved audit trail. Under Consumer Duty, that kind of documentation is important.

One clear way AI can help behind the scenes is with writing reports and paperwork. For example, instead of writing each letter about suitability, or explaining things like environmental, social, and governance (also called ESG) or climate risks from scratch, AI can help you draft them faster. AI can create a draft letter using the client’s information, the products they’ve picked, and their preferences. This is particularly important as offerings become increasingly personalised.

AI is also useful in monitoring investments. It can check portfolios for climate risk and sustainability claims. It can send alerts when, for example, a fund no longer matches the client’s chosen sustainability profile.

Helping you navigate your Consumer Duty obligations 

So, AI can support two of the cross-cutting obligations under Consumer Duty. These are avoiding foreseeable harm and enabling clients to pursue their objectives with up-to-date information.

AI has a clear role in risk management and governance. It can aggregate patterns across thousands of clients. It can then determine whether certain groups systematically end up in products that don’t match their stated sustainability preferences. It can also identify where clients are dropping out of digital journeys. This is the kind of information regulators will increasingly expect firms to answer via data, not just anecdotes.

So overall, AI and automation aren’t just a competitive threat. They provide a toolkit to scale what you already do well, and to connect the dots between regulatory expectations, sustainability, and client experience.

Turning to the final module, we analyse new research on robo-advisor design that asks a simple question – which features of an AI-driven product persuade ordinary consumers to use it? The findings should be interesting for firms who want to design such solutions, as well as IFAs seeking to learn which consumers are most likely to steer away from such solutions and use human advice instead.

Our online course shows how AI can help you work smarter, get better results for clients, and navigate the Consumer Duty rules.

Consumer Duty in an Age of AI and Sustainability, is a free 14-hour online course offered by King’s Business School. The next course begins on November 5 with applications deadline October 16. Further intakes will be available in 2027.

To find out more visit: Consumer Duty in the Age of AI & Sustainability | King's College London