AI financial advice maybe breaching the law

Generative AI chatbots may be acting in breach of the Financial Markets Conduct Act (FMCA)’s financial adviser licensing and regulatory requirements, according to Chapman Tripp partner Tim Williams in his address to over 450 IBANZ members at IBANZ’s annual Insurance Industry Legislation Update session.

“The Financial Markets Authority (FMA) should investigate whether the current legislation is responding appropriately to the rapid development of AI capabilities. If not, a decision is needed how retail clients’ interests in accessing useful financial information can be balanced against the risks of receiving potentially unsuitable advice without the full protections of the FMCA,” Williams said. 

IBANZ chief executive Katherine Wilson has supported Williams’ concerns and has raised the issue with the FMA which currently has a workstream focused on ensuring New Zealanders have access to financial advice.

“IBANZ members employ several thousand qualified financial advisers. We operate a comprehensive professional development programme which helps ensure our members are well equipped to provide high quality financial advice.  We're aware that the advice available via AI tools can be of questionable quality and continue to be concerned about the potential harm inaccurate or misleading advice could cause. IBANZ has raised this issue with the FMA because we believe it’s an important matter for the regulator to consider,” Wilson said.