Aipedia: Wealth managers and discretionary fund managers

AI washing: marketing claims by wealth firms

Aipedia, by the Apex broking team · Last reviewed 2026-10-30

AI washing means overstating how a firm uses AI, and for wealth managers it creates complaint and regulatory risk that PI may not cover. US regulators have already penalised investment advisers for misleading AI claims.

Part of: AI in Wealth managers and discretionary fund managers

In short

Some wealth managers may describe "AI-powered" investment processes, yet the FCA's 2026 survey found only 13% of discretionary firms use AI tools. In March 2024 the US SEC settled charges against investment advisers Delphia and Global Predictions for misleading AI claims. In the UK, the Consumer Duty requires good faith and communications clients can rely on, and the FCA encourages accurate disclosure of AI use and its limits. PI may not respond to AI washing complaints: marketing, fee refunds, fines and deliberate misstatements are commonly outside cover.

What AI washing means for wealth firms

AI washing is describing products or processes as using AI, or using it more than they do. For wealth managers the risk is in pitch books, websites, factsheets and client reports that describe "AI-powered" portfolio construction or research. With the FCA's 2026 wealth management survey finding that only 13% of discretionary firms use AI tools, and 45% including those considering it, the gap between marketing and reality can be wide.

The US enforcement precedent

On 18 March 2024 the US Securities and Exchange Commission announced settled charges against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for making false and misleading statements about their use of AI. Delphia agreed to pay a civil penalty of $225,000 and Global Predictions $175,000. These are US cases under US law, but they show how a regulator treats AI claims that a firm cannot evidence. No equivalent UK enforcement action against a wealth manager has been verified.

The UK rules that apply

Consumer Duty: PRIN 2A.2.1R requires firms to act in good faith, and the consumer understanding outcome requires communications that clients can understand and rely on. An overstated description of an AI investment process fails both.
Transparency about AI: the FCA's October 2026 good-practice page encourages firms to tell consumers how AI is used and its limits. Accuracy works in both directions: neither hide material AI use nor exaggerate it.
Governance: claims about AI should be approved by someone who knows how the process actually works, with evidence on file.

See FCA AI expectations for wealth managers for the wider framework.

Where it goes wrong

Common problems are describing a rules-based screen as machine learning, claiming that AI "selects" investments when it only summarises research, implying that AI reduces risk or improves returns without evidence, and keeping old claims after a tool has been switched off.

Illustrative scenario: a firm launches a portfolio range marketed as using proprietary AI to adjust allocations to market conditions. In practice the investment committee meets monthly and uses an AI tool only to summarise research. After a period of poor performance, clients complain that they chose the range because of the AI process and were misled. The complaint is upheld, and the firm reviews all its marketing.

Why PI may not cover AI washing

Several features of AI washing claims sit awkwardly with PI:

Marketing versus professional services: claims about how a firm markets itself may fall outside the policy's definition of professional services.
Return of fees: clients often seek fees back, which is commonly excluded or not treated as loss.
Fines and penalties: regulatory fines are commonly excluded and may be uninsurable; see are AI regulatory fines insurable.
Deliberate acts: knowingly false statements are usually excluded.

A client who can show financial loss from relying on a negligent misstatement in the course of the firm's services may have a claim PI responds to, subject to the wording. Check also for AI exclusions and clauses.

Practical controls

Keep a register of every public statement about AI, with evidence and an owner.
Describe what the AI does and what people decide, in plain terms.
Avoid claims that AI improves returns or reduces risk unless you can evidence them.
Review claims when tools change or are withdrawn.
Align marketing with client reports and with how investment signals and ESG screening are actually used.

How Apex helps

Apex arranges PI for wealth managers and discretionary fund managers. A broker can review whether your PI wording treats marketing statements as professional services and what is excluded. See does PI cover wealth managers' AI errors and AI in wealth management.

Sources

Frequently asked

Has the FCA fined a UK firm for AI washing?

No UK enforcement action against a wealth manager for AI washing has been verified. Well-known examples are the SEC's March 2024 settlements with Delphia and Global Predictions in the US, which involved civil penalties of $225,000 and $175,000.

How should we describe AI in our investment process?

Plainly and specifically: say what the tool does, what data it uses and what people decide. Avoid unqualified claims that AI improves returns or reduces risk. Keep evidence for each statement and review it whenever the tool or process changes.

Is it a problem to say we use AI if we only use it for admin?

Saying so accurately is fine. The risk is implying that AI drives investment decisions or improves outcomes when it does not. The Consumer Duty requires communications clients can rely on.

Will PI cover a complaint that our AI marketing was misleading?

It depends on the wording. Marketing may fall outside professional services, and fee refunds, fines and deliberate misstatements are commonly excluded. A claim for loss from a negligent misstatement in the course of services may be covered.

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.

Start a PI quote Request a callback

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.