How to assess AI's threats and opportunities

Matt Connell, director of policy and public affairs at the Chartered Insurance Institute, and Kevin Sloane, senior policy adviser at trade body Pimfa, warn that unless advisers got on top of developments now, businesses could be left behind, or left exposed. 

According to Pimfa, some advice companies are starting to see the potential for improved processes, servicing and communications using AI.

But even if companies are not intending to use AI in the near future, advisers should make sure they have a robust and up-to-date cyber policy in place to spot breaches, because worse than the prospect of being left behind is the prospect of getting hit by a claim.

Otherwise, they could be liable to being sued by clients for any AI or machine-learning-related breach of information or security.

You will see that as firms embrace AI they could shave off days' worth of admin and back office processing time.Ian McKenna, FTRC 

Connell says such issues were already happening, and AI would exacerbate this potential threat. Indeed, many companies have already started to insure themselves against both known and unknown cyber threats.

He explains: "Even today, a key cause of fraud is false instructions being sent to advisers after their email has been hacked, and the adviser entering the instruction onto an investment platform because their system has been compromised.

"With the development of AI it will become more and more common for these instructions to be backed up by plausible communications created by AI."

Sloane says: "These days, it is not a question of 'if' but 'when' firms will be attacked.

"The stakes are high; a wealth manager or adviser can spend years or decades building a relationship with a client, but that bond of trust can be broken with a single keystroke.”

Not a dim-and-distant development

While the large-scale use of AI might seem one sci-fi drama removed from the business of real-life financial advice, companies large and small have already started to create action plans around it. 

The so-called 'fifth industrial revolution' is already in motion and, unlike Alfred Tennyson's science, is not moving "slowly, slowly, creeping on from point to point", but hurtling towards us like yet another Fast and Furious sequel.

Insurance companies have already started to embed AI in its processes, and this will only escalate to underwriting and quicker decision-making. 

Firms may be reluctant to go too far with specific uses of AI until further guidance on the liability of its use is provided.Kevin Sloane, Pimfa

Some advisers have started working with platform and discretionary fund management providers to test how technology such as Microsoft Copilot could augment their business.