Aipedia: Financial advisers

AI for fund research and portfolio selection

Aipedia, by the Apex broking team · Last reviewed 2026-10-27

Advisers can use AI to screen funds and summarise research, but the firm remains responsible for the due diligence behind every recommendation. Stale or invented fund data can make an otherwise sound recommendation unsuitable, and the error may spread across a whole centralised investment proposition.

Part of: AI in Financial advisers

In short

AI tools now screen fund universes, summarise factsheets and key information documents, compare charges and suggest model portfolios. They speed up research but can return out-of-date figures, misattribute performance or invent details. COBS 9.2.1R suitability, the Consumer Duty, the conflicts principle and SYSC 8 outsourcing duties all apply. Because research usually feeds a centralised investment proposition, one error can affect many clients. PI usually responds to research-led suitability claims as advice claims, subject to the wording, but systemic errors raise aggregation questions.

How advisers use AI for research

Research is one of the most natural uses of AI in an advice firm. Advisers use it to filter funds by sector, risk rating, charges and performance, to summarise factsheets and key information documents, to compare platforms, and to draft the research section of suitability reports. Larger firms use AI to support investment committees building model portfolios for a centralised investment proposition.

Unlike a database query, a generative AI tool may answer confidently even when it has no reliable source. Some tools draw on data that is weeks or months old, and few make the date of each figure obvious.

Research also tends to be reused. A fund summary produced once may be copied into dozens of suitability reports and annual reviews, so an error introduced at the research stage can travel a long way before anyone notices. That makes research a firm-level control issue rather than a matter for individual advisers alone.

The duties that apply

Suitability: COBS 9.2.1R(1)(a) requires reasonable steps to ensure the recommendation is suitable, which depends on accurate product information.
Consumer Duty: PRIN 2A.2.8R requires firms to avoid causing foreseeable harm, and the Duty's fair value expectations make accurate charges information important.
Conflicts: the FCA AI Update maps fairness to Principles 6, 7, 8 and 9, and Principle 8 covers conflicts of interest. A tool that favours certain providers, or a vendor paid by product providers, raises conflicts questions.
Outsourcing: SYSC 8.1.6R says the firm "remains fully responsible for discharging all of its obligations" when outsourcing critical functions.
Individual conduct: COCON Rule 2 requires due skill, care and diligence in research.

What can go wrong

The common failure modes are stale data, such as last year's charges or a closed share class; invented data, such as a performance figure or fund objective that does not exist; mismatched data, where the AI blends two similarly named funds; and unexplained screening, where a fund is excluded for reasons nobody can reconstruct.

Illustrative scenario: an investment committee uses an AI tool to summarise factsheets for a cautious model portfolio. The summary for one bond fund omits a recent change of objective allowing higher-risk holdings. The fund remains in the cautious model for a year, and when it falls sharply several clients complain that the portfolio did not match their risk profile.

How PI usually responds

Research errors usually surface as suitability claims, and PI commonly responds to them as advice claims, subject to the wording and excess. Where one research error affects a whole model portfolio, insurers may treat the claims as related, which affects how the limit and excess apply. Firms with discretionary permissions should check how their policy treats portfolio management; see discretionary versus advisory permissions and PI and scope of duty in IFA claims.

Practical controls

Verify every figure used in a recommendation against the provider's current documents.
Record the data date and source of any AI-produced research.
Ask vendors how data is sourced and whether any provider pays for inclusion.
Keep the investment committee's minutes, challenge and rationale, not just the AI output.
Re-check portfolios when funds change objective, manager or charges.
Include research checks in AI file checking and link them to risk profiling and suitability reports.

How Apex helps

Apex arranges PI for financial advisers. A broker can review your cover and how your policy treats AI-assisted work, including how research and model portfolio claims are treated. See AI in financial advice.

Sources

Frequently asked

Can I rely on AI summaries of fund factsheets?

Only after checking them. The firm remains responsible for suitability under COBS 9.2.1R, and generative AI can produce stale or invented figures. Verify charges, objectives and risk ratings against the provider's current documents before using them in advice.

Is an AI research vendor an outsourcing arrangement?

If it performs a critical function, SYSC 8 is likely to apply, and SYSC 8.1.6R says the firm remains fully responsible for its obligations. Treat the vendor with the same due diligence and oversight as other critical service providers.

What if a research error affects a whole model portfolio?

Review the affected clients promptly and consider whether to notify your PI insurer of circumstances. How the policy aggregates related claims will affect how the limit and excess apply, so check the wording with your broker.

Does using AI create a conflicts of interest issue?

It can. If a tool ranks funds using criteria influenced by payments from product providers, or favours certain platforms, that raises Principle 8 issues. Ask vendors how rankings are produced and record your review.

Check your PI covers how you use AI

Tell us about your firm and the work you do. A broker will review how your current PI treats AI-assisted work, or arrange new cover. No fee for a quote. Or call 0117 325 0027.

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Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.