AI financial advice maybe breaching the law
Do AI’s responses fit with New Zealand’s financial advice laws?
Wednesday, December 10th 2025, 8:42PM
Generative AI chatbots may be acting in breach of the Financial Markets Conduct Act (FMCA)’s financial adviser licensing and regulatory requirements, according to Chapman Tripp partner Tim Williams in his address to over 450 IBANZ members at IBANZ’s annual Insurance Industry Legislation Update session.
“The Financial Markets Authority (FMA) should investigate whether the current legislation is responding appropriately to the rapid development of AI capabilities. If not, a decision is needed how retail clients’ interests in accessing useful financial information can be balanced against the risks of receiving potentially unsuitable advice without the full protections of the FMCA,” Williams said.
IBANZ chief executive Katherine Wilson has supported Williams’ concerns and has raised the issue with the FMA which currently has a workstream focused on ensuring New Zealanders have access to financial advice.
“IBANZ members employ several thousand qualified financial advisers. We operate a comprehensive professional development programme which helps ensure our members are well equipped to provide high quality financial advice. We're aware that the advice available via AI tools can be of questionable quality and continue to be concerned about the potential harm inaccurate or misleading advice could cause. IBANZ has raised this issue with the FMA because we believe it’s an important matter for the regulator to consider,” Wilson said.
Williams explained that “in New Zealand, AI chatbots can give pure factual information, advise on financial products as a class, or pass on another person’s financial advice”.
“However, if prompted, at least some of the most popular chatbots will go further and recommend financial products, which requires licensing and compliance with various duties.”
This should be of political concern, as the effect would be to deny recipients of AI Chatbot financial advice the significant FMCA financial advice protections. Williams’ comments follow concerns expressed in Australia about the suitability of AI chatbots giving share trading recommendations.
“If, in the ordinary course of business, an AI chatbot makes a recommendation to or for retail clients, or gives an opinion about a financial product, designs an investment plan, or provides specific types of financial planning without a licence, it would be giving financial advice in breach of New Zealand law as it is currently written,” Williams said.
“The FMA has given helpful guidance about robo-advice in the past, which identifies the need for a financial advice provider licence and to comply with other duties when giving financial advice to retail clients in New Zealand”.
Williams also advised members that financial advisers using AI tools in their practice need to be aware of the potential for their own breaches of the Code of Professional Conduct if their records do not demonstrate that their reliance is reasonable, when they rely on generative AI advice in formulating their recommendations.
"Members should also ensure, when prompting their AI tools for financial advice, to de-personalise their prompts so only authorised personnel of a financial advice provider have access to client information, as required by the Code Standards."
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