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Aipedia: Financial advisers
The FCA has published guidance and reviews on AI but no AI-specific rules, so advice firms must apply COBS 9, the Consumer Duty and SM&CR to every AI tool. For senior managers, the practical effect is personal accountability for how AI is chosen, tested and supervised.
Part of: AI in Financial advisers
In short
Four FCA publications define the AI position for advice firms. The April 2024 AI Update maps the Government's AI principles onto existing rules. "AI and the FCA: our approach" (September 2025, updated October 2026) confirms no extra AI regulations are planned. The Mills Review (July 2026) makes seven recommendations to the FCA Board. The 19 October 2026 good and poor practice page sets out expectations on testing, transparency, monitoring and SM&CR ownership, while stating that it creates no new requirements. None changes who is responsible: the firm and its senior managers.
| Publication | Date | Status | Key point for advisers |
|---|---|---|---|
| AI Update | 22 April 2024 | Mapping of existing rules | Each AI principle is met through rules you already follow, including Principle 9 on suitability of advice. |
| AI and the FCA: our approach | 8 September 2025, updated 2 October 2026 | Statement of approach | No extra AI regulations planned; Consumer Duty and SM&CR are the key frameworks. |
| AI Live Testing (FS25/5) | September 2025, first cohort 3 December 2025 | Supervised testing, no formal relief described | Some testing covers AI tools providing financial advice. |
| The Mills Review | 6 July 2026 | Recommendations to the FCA Board | Perimeter, autonomous models, agentic finance, advice gap and fraud risk. |
| AI in financial services: good practice and areas for improvement | 19 October 2026, updated 20 October 2026 | Good and poor practice, no new requirements | Firms remain responsible for consumer outcomes and for outsourced AI. |
The FCA AI Update responded to the Government's AI White Paper by mapping its five principles onto the Handbook rather than writing new AI rules. For advice firms the mapping is a useful checklist:
This FCA web page, first published on 8 September 2025 and last updated on 2 October 2026, says: "We do not plan to introduce extra regulations for AI." It highlights the Consumer Duty and SM&CR accountability as the key frameworks and points firms to the FCA AI Lab. The FCA also runs AI Live Testing: its feedback statement FS25/5 followed an April 2025 engagement paper, and the first cohort was announced on 3 December 2025. The FCA says some of that testing covers AI tools providing financial advice, but no formal regulatory relief is described.
The Mills Review, "AI and the future of retail financial services", followed an engagement paper in January 2026 and was published on 6 July 2026. It makes seven recommendations to the FCA Board, including securing the regulatory perimeter, monitoring the move to autonomous models, building foundations for "agentic finance" and an AI-enabled public financial capability service. It notes that AI could help close the advice gap but could also increase fraud and consumer harm, and that around one in five UK adults say they are open to AI making decisions for them. The FCA Board's response is still awaited, so nothing in the review binds firms today.
The newest and most practical publication is the October 2026 good and poor practice page. It covers machine learning, generative AI and agentic AI across financial services and does not single out advice firms, but its messages apply directly:
Translated into an advice firm, the guidance points to a handful of concrete duties. Keep an inventory of every AI tool used in the advice process, from meeting notetakers to suitability report drafting. Give each use case a named senior manager owner. Record why each tool was chosen, how it was tested and how advisers check its output. Treat AI vendors as outsourcing under SYSC 8, since the firm "remains fully responsible". Build AI oversight into file checking and the Consumer Duty board report.
Individual advisers remain personally exposed under COCON Rule 2 (due skill, care and diligence) and Rule 6 (good outcomes for retail customers). Relying on an AI draft without review is unlikely to meet either standard.
Related changes sit alongside the AI material: the targeted support regime took effect on 6 April 2026, and CP26/10 proposes simplified suitability rules including a single attitude-to-risk concept. CP26/10 does not mention AI.
No FCA statement specifically on AI and PI was found. The PI framework is unchanged: cover is compulsory under IPRU-INV 13, and a policy that excludes business carried on in the past or during the period generally triggers an additional capital requirement under IPRU-INV 13.1.21R. Because the FCA treats AI as part of ordinary regulated activity, a well-documented AI governance framework is evidence an insurer may usually look for at renewal. See Does adviser PI cover AI mistakes? and what to document about AI use for your PI.
Apex arranges PI for financial advisers and can help you explain your AI governance to insurers in the terms the FCA uses. For the wider picture, see AI in financial advice.
It is a good and poor practice publication and states that it does not create new requirements. It does show how the FCA reads existing rules such as the Consumer Duty and SM&CR, so supervisors are likely to expect firms to have considered it.
The FCA does not prescribe one for small firms. Its October 2026 page recommends mapping AI responsibilities across SMFs and assigning ownership by use case, so each AI tool should have a named senior manager accountable for its testing, monitoring and records.
No. The Mills Review, published 6 July 2026, makes seven recommendations to the FCA Board. They are recommendations, not rules, and the Board's response is still awaited. Firms should watch for any consultation that follows.
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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.
