Bold claim: AI-driven financial guidance may be breaking the law. That’s the core issue at the heart of the latest debate in New Zealand about whether generated financial advice complies with the FMCA and its licensing requirements. While AI can provide handy information, the question is whether its outputs cross the line into regulated financial advice without the proper protections.
Latest headlines highlight a critical tension: can AI chatbots deliver financial information or recommendations without triggering licensing obligations? Tim Williams, a partner at Chapman Tripp, argued to more than 450 IBANZ members that current rules may not be keeping pace with rapid AI development. He called for the Financial Markets Authority (FMA) to assess whether the FMCA adequately guards retail clients in this evolving landscape and, if necessary, to strike a balance between access to useful information and the risk of receiving unsuitable advice lacking full regulatory protections.
IBANZ chief executive Katherine Wilson backed Williams’ concerns and has raised the issue with the FMA, which is already focusing on ensuring NZers have access to financial advice. Wilson noted that IBANZ members employ thousands of qualified advisers and run an extensive professional development program to ensure high-quality guidance. Still, they remain wary of AI-generated advice whose quality can be questionable and potential harm from inaccurate or misleading content. This concern led IBANZ to bring the issue to the regulator.
Williams clarified that in New Zealand, AI chatbots can present pure factual information, offer guidance on financial products as a class, or relay another person’s financial advice. Yet, when prompted, some popular chatbots may go further and actively recommend specific financial products, which would necessitate licensing and compliance with several duties.
This topic has political resonance because it could effectively strip retail clients of the strong FMCA protections that apply to traditional financial advice. Williams’ alarm aligns with similar anxieties observed in Australia about the suitability of AI chatbots for stock trading recommendations.
If an AI chatbot routinely makes recommendations to retail clients, expresses opinions about a financial product, designs an investment plan, or provides targeted financial planning without a licence, it would constitute financial advice under current New Zealand law. Williams pointed out that the FMA has previously issued guidance on robo-advice, emphasizing the need for a financial advice provider licence and adherence to duties when advising retail clients in NZ.
Additionally, Williams warned that advisers using AI tools should be mindful of potential breaches of the Code of Professional Conduct if their documentation doesn’t show that they reasonably relied on AI when forming recommendations. He urged advisers to de-personalise prompts and ensure only authorised personnel access client information in line with Code Standards.
Key takeaway: while AI can be a powerful aid, it can also blur lines between information and regulated advice. The regulatory question remains open: will the FMA confirm that AI-assisted guidance requires licensing, or will new rules emerge to address AI’s rapid capabilities? What do you think—should AI tools used in financial services be treated as simple information sources, or as regulated advisers requiring licensing and robust protections? Share your thoughts in the comments.
