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Aipedia: Financial advisers
Advisers can use generative AI to draft suitability reports, but the duty to make the recommendation suitable, and to explain it accurately, stays with the adviser. A report is the main evidence of what was advised and why, so any AI error in it is likely to surface in a complaint or claim.
Part of: AI in Financial advisers
In short
Generative AI can turn fact-find data and adviser notes into a draft suitability report in minutes. The legal position is unchanged: COBS 9.2.1R(1)(a) requires the firm to take reasonable steps to ensure the personal recommendation is suitable, and the Consumer Duty requires good faith and avoiding foreseeable harm. Hallucinated product features, wrong charges or misstated objectives can turn a sound recommendation into an apparently unsuitable one. PI usually responds to resulting suitability claims as it would to any advice error, subject to the wording, but a weak file makes defence harder.
The typical workflow feeds a generative AI tool with the fact-find, the adviser's meeting notes, product research and the firm's report template, and asks it to produce a first draft. Some back-office systems now build this in. Advisers use it to save time on standard sections, such as explaining objectives, risk, charges and alternatives considered, and to tailor tone to the client. The output reads fluently, which is precisely the risk: errors are hard to spot in a polished document.
The draft is only as good as its inputs. If the fact-find is incomplete or the product research is out of date, the AI will fill gaps with plausible wording rather than flag them. That makes the adviser's review step the real control, not the tool.
AI drafting tools can produce confident but wrong statements, often called hallucinations (see AI hallucination liability). In a suitability report that might mean a product feature that does not exist, an incorrect charge, a guarantee the plan does not carry, or an objective the client never expressed. Templates can also pull wording from a previous client's report.
Illustrative scenario: an adviser recommends consolidating pensions into a single plan. The AI-drafted report states that the ceding scheme had no valuable guarantees, because the tool summarised an incomplete scheme document. The adviser signs off without checking. Years later the client discovers a lost guaranteed annuity rate and complains. Even if the adviser had checked the guarantee during the meeting, the report now records the opposite, and the firm struggles to show the recommendation was suitable.
Adviser PI is compulsory under IPRU-INV 13.1.5R and typically responds to claims alleging negligent advice. Where the policy is silent on AI, a suitability claim arising from an AI-drafted report is usually treated like any other advice error, subject to the policy terms, excess and any exclusions. The claim itself will rarely be about AI: it will be about whether the advice was suitable and properly explained. See how PI responds to mis-selling and suitability claims and whether adviser PI covers AI mistakes.
Where cover can be tested is in conditions requiring reasonable precautions, or where an insurer has added an AI or technology exclusion. Notify circumstances promptly if you find a pattern of errors across reports.
Apex arranges PI for financial advisers. A broker can review your cover and how your policy treats AI-assisted work, including whether AI-drafted reports raise any conditions or exclusions. More context is in AI in financial advice.
The FCA has not banned it, but the firm remains responsible under COBS 9.2.1R and the Consumer Duty. In practice the adviser should review and approve every statement, because the signed report becomes the main evidence of what was recommended and why.
There is no specific rule requiring it, but the FCA's October 2026 good-practice page encourages telling consumers how AI is used and its limits. Your client agreement and privacy notice should describe AI use accurately.
Usually, where the wording is silent on AI and the claim arises from regulated advice, subject to the policy terms and excess. Check for AI or technology exclusions and conditions about checking outputs, and notify circumstances promptly if you find a pattern of errors.
Keeping the inputs, the AI draft and the final signed version helps show what the adviser reviewed and changed. SYSC 9.1.1R requires records sufficient for compliance monitoring, and a clear audit trail is also useful evidence if a complaint reaches the Financial Ombudsman Service.
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.
Start a PI quote Request a callbackApex 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.
