The question is not whether AI will replace advisers. The question is whether advisers will continue to provide something AI can't.
A few weeks ago, I wrote in Financial Reporter about the FCA's ‘Emerging Technology Horizon Scan’ report and how it suggested we were moving from a do-it-yourself world towards a do-it-for-me one, where consumers increasingly rely on AI to search, compare and even make financial decisions on their behalf. At the time, that felt like a glimpse into the future.
Following the publication of the FCA's Mills Review this week entitled ‘AI and the future of retail financial services’, however, it already feels as though that future has moved much closer.
What struck me most about this review was not what it said about AI itself, but the questions it is asking about the future. Reading both the review and the industry's immediate reaction, I was left with the impression that the regulator and the mortgage market are having two very different conversations.
If we are not careful, we risk spending too much time answering yesterday's questions while the FCA is already asking tomorrow's.
The FCA has moved the debate on
Much of the industry's discussion around AI continues to focus on how advisers can use it within their businesses. We are rightly talking about improved efficiency, reduced administration, faster document processing, meeting summaries and helping advisers spend more time with clients rather than behind a desk. In other words, it is ‘chips with everything’ but is this a balanced diet?
The FCA however appears to be asking something altogether different. Rather than concentrating on how advisers use AI, it is looking at how consumers will use AI and what that means for the future shape of financial services.
It is considering a world where consumers increasingly turn to AI before they speak to a lender, before they speak to an adviser and, in some cases, before they even decide whether they need professional advice at all. That is a far more profound shift than simply using AI to make businesses more efficient, because it challenges how customers enter our market in the first place.
The first conversation is changing
For decades, the mortgage advice journey has usually begun with a conversation between the consumer and an adviser. Clients explained what they wanted to achieve, discussed their circumstances and relied upon an experienced professional to guide them through the options available.
Increasingly, I suspect the first conversation may now happen somewhere else. Therefore, whoever controls where a consumer starts their mortgage journey increasingly captures the value, whether that is an OS assistant, a general-purpose AI app, a bank's own app, an aggregator, or a future independent customer-owned agent.
Consumers, as a starting point, are likely to spend time ‘discussing’ affordability, product options, fixed versus tracker rates, lender criteria and borrowing capacity with whichever of the above they go to first.
By the time they contact an adviser, they may already have formed a view about the mortgage they believe is right for them, or they may arrive with an AI-generated recommendation that they simply want someone to sense-check. At that point, the adviser has an opportunity to ‘mark’ this ‘homework.
As a further positive, and according to the Mills Review, mortgage AI adoption is currently the lowest of the major product categories tested (18% versus 45% for debt advice, for example), which is a genuine window for advisory firms to build capability and position before the market moves.
All of this therefore means that advisers don’t become less relevant, but it does mean the role begins to change. The challenge is no longer ensuring advisers are the first conversation. The challenge is ensuring advisers secure the essential second one.
The value of advice must become even clearer
Today, I suspect most people borrowing several hundred thousand pounds will still want the reassurance that comes from speaking to a regulated professional adviser before making such a significant financial commitment.
Whether that remains true in the years ahead – and who knows how long into the future this might be - is much harder to predict, particularly as younger generations become increasingly comfortable allowing technology to support, and perhaps eventually make, more of their financial decisions.
We should therefore not assume consumers will automatically seek that second conversation with advisers simply because they always have. Instead, advisers need to give consumers a compelling, and ongoing, reason to do so.
That reason cannot simply be access to more lenders or a better sourcing system, because AI will continue to improve at gathering and analysing information. The value increasingly lies elsewhere.
The best advisers have always looked beyond the mortgage itself. They understand family circumstances, future aspirations, changing incomes, retirement planning and protection needs. They ask questions clients had not even considered asking themselves, and therefore wouldn’t necessarily as AI, and identify opportunities or risks that would otherwise remain hidden.
In other words, advisers provide context, judgement and perspective, not simply product recommendations.
Holistic advice becomes an even stronger differentiator
The shift the FCA is outlining could actually strengthen the case for holistic advice rather than weaken it. AI may be perfectly capable of identifying a suitable mortgage based on the information it has been given, but mortgage advice has never simply been about arranging finance. Every conversation should also explore protection, income resilience, future borrowing plans, affordability under changing circumstances and wider financial objectives.
Those are areas where experience, judgement and genuine understanding of an individual's circumstances continue to matter enormously.
Equally important are the protections that sit behind regulated advice. Consumers relying solely on AI recommendations may not fully appreciate the value of an established regulatory framework, professional accountability and the safeguards available if something goes wrong. You’re not getting access to FOS for complaints and compensation via the FSCS, if you’re using AI’s recommendations.
Those are significant benefits that our profession perhaps takes for granted, but which become increasingly valuable as consumers are presented with more unregulated sources of financial guidance.
The profession must shape the next conversation
The greatest mistake our industry could make would be to spend the next few years simply repeating the argument that AI will not replace advisers. That may ultimately prove to be true, but it is not a strategy. The better question is whether advisers are continuing to provide something that AI cannot?
The FCA appears to have accepted that AI will become an increasingly important part of the consumer journey. Rather than resisting that change, we should be thinking about where advisers add the greatest value within it. If AI increasingly becomes the consumer's first conversation, then our responsibility is to ensure the second conversation remains indispensable.
The Review's own evidence is trust, complexity and high stakes keep consumers wanting a human to advise them, and mortgages sit squarely in that category. Around 90% of first-time buyers still use a broker today. Should this be made mandatory? We, at Paradigm, certainly think so, and would appreciate your support in our campaign to achieve this.
Overall, it appears that advisory firms do have a window of opportunity that they should be exploiting. That means embracing technology where it improves efficiency, while becoming even better at delivering the qualities AI still struggles to replicate: judgement, empathy, challenge, context and holistic advice.
