[GRTV] FMA puts AI advice and banks’ return to wealth management under spotlight

Artificial intelligence and the prospect of banks moving back into financial advice are emerging issues for the Financial Markets Authority following its landmark Access to Advice research.

In the second part of a GRTV interview with FMA director of deposit taking, insurance and advice Michael Hewes, the regulator discusses the growing use of AI by consumers and advisers, vertical integration and what happens next following the report.

Hewes says AI will be a particular focus for the FMA over the coming year as it builds its own capability and works with industry organisations.

The regulator sees AI as a potentially valuable tool for advisers, but Hewes warns about the technology’s tendency to produce incorrect information, or “hallucinations”.

For consumers using AI directly for financial guidance, the message is to test its recommendations and, where appropriate, put a “human set of eyes” over the results.

Hewes says regulators internationally are grappling with the same challenge. The FMA is looking at work being done by overseas counterparts, including Australian and UK regulators, as it considers what guardrails may be needed.

The interview also explores whether banks and other vertically integrated financial institutions could play a bigger role in advice.

FMA research found bricks-and-mortar institutions remain important to consumers, while Hewes says it can sometimes be easier for institutions not to provide advice. That creates an opportunity for banks and other providers to reconsider their advice models.

However, any return to advice would take place in a different regulatory environment from that which existed before Australia’s Royal Commission.

Hewes points to the Conduct of Financial Institutions regime, fair conduct programmes and stronger expectations around consumer outcomes as safeguards against some of the problems seen previously.

He also confirms the FMA expects vertically integrated providers to refer customers to external advisers where appropriate and says some banks already have arrangements with specialist insurance advisers.

Hewes says the Access to Advice report has been positively received by the advice sector and suggests the FMA could revisit the research in about 24 months to measure progress.

 Watch the full GRTV interview with Michael Hewes for his views on AI advice, banks returning to wealth management and what the FMA plans to do next. 

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