Millions Use AI for Financial Advice Without Regulatory Protection

The Regulatory Gap

Twenty-eight million adults in the United Kingdom turned to artificial intelligence for financial questions over the past year, according to Lloyds Banking Group's Consumer Digital Index. Yet these general-purpose AI models operate outside the regulatory framework that governs traditional financial advice—they carry no fiduciary duty, no professional indemnity insurance, and no formal accountability when they get things wrong.

The scale of adoption is striking. Research from PYMNTS Intelligence found that 62% of Gen Z consumers in the United States are open to using AI for financial planning scenarios, while 39% of all U.S. consumers have already used AI for payment-related activities in the last three months. The U.K.'s Financial Conduct Authority discovered that more than a quarter of British consumers trust platforms like ChatGPT, Claude, or Gemini for financial advice—most without understanding that consumer protections covering licensed advisers don't extend to AI.

Why it matters

This isn't a theoretical concern. Financial regulation was built around a specific relationship: a licensed adviser who owes clients a duty of care and answers to regulators when errors occur. AI models optimize for plausible-sounding answers, not client outcomes. When a licensed adviser gives bad advice, clients have formal routes to redress. When an AI model errs, clients simply have the advice—and potentially serious financial consequences.

Real-World Errors With Real Consequences

The Guardian documented concrete examples of AI providing incorrect financial guidance. ChatGPT and Microsoft's Copilot told users they could invest £25,000 in an ISA, when the actual limit is £20,000—advice that would breach HMRC rules if followed. ChatGPT also incorrectly claimed travel insurance was mandatory for most EU trips.

An MIT expert identified the absence of fiduciary duty as a fundamental structural limitation, according to PYMNTS. The model's goal is generating a coherent response, not protecting the user's financial interests.

Regulators Scramble to Catch Up

The FCA has given itself three to six months to determine whether its regulatory perimeter needs to expand to cover general-purpose AI models. Sheldon Mills, the FCA's executive director who authored the Mills Review, noted that personal recommendations from chatbots could blur the boundary between guidance and regulated advice. Continuous adaptive recommendations may start to resemble the latter, according to Insurance Journal.

FCA CEO Nikhil Rathi acknowledged the challenge at the Agents of Change: Generative and Agentic AI in Financial Services 2026 conference. "Technology is moving much faster than many regulatory paradigms," Rathi said, as reported by PYMNTS. "Legislation will never keep up."

Jonathan Herbst, global head of financial services at Norton Rose Fulbright, told Insurance Journal that Mills was not proposing an immediate crackdown. "That's a big question for policymakers and one that will only become more pressing as AI adoption accelerates," Herbst said.

Financial advice remains a regulated activity that can only be provided by authorized businesses. The millions of consumers using AI to make financial decisions don't know that. The regulators trying to address the gap do.

These details were first reported by PYMNTS.