The recommendation is contained in an independent review commissioned by the Financial Conduct Authority (FCA) and published on Monday. The report highlights the rapid adoption of AI across the financial sector and warns that existing regulations may no longer be sufficient as AI systems become increasingly influential in shaping financial decisions.
The review was led by the FCA's Executive Director, Sheldon Mills, who also raised concerns about the growing dependence of financial institutions on a small number of major technology providers, warning that such concentration could pose risks to the wider financial system.
Regulators around the world have intensified scrutiny of artificial intelligence as frontier AI models become more sophisticated. Particular attention has focused on operational and cybersecurity risks, as well as the emergence of autonomous or "agentic" AI systems capable of carrying out tasks with limited human oversight.
According to the review, more than one in four consumers in the United Kingdom already trust AI tools such as ChatGPT, Claude and Gemini to provide financial guidance. However, many users remain unaware that the legal protections available when dealing with authorised financial advisers do not apply to responses generated by AI chatbots.
While OpenAI, Anthropic and Google were not immediately available to comment on the findings, the report underscores growing concern over how consumers distinguish between general financial information and regulated financial advice.
Under UK law, personalised financial advice can only be provided by firms authorised by the FCA. AI systems are therefore expected to offer only general guidance rather than recommendations tailored to an individual's financial circumstances.
Mills warned, however, that advances in AI could increasingly blur that distinction.
"Personal recommendations by a chatbot could blur the boundary and continuous and adaptive recommendations may start to look like regulated advice."
To address the emerging challenge, Mills recommended that the FCA examine within the next three to six months whether the current regulatory perimeter should be expanded to reflect the scale, nature and impact of AI models operating outside existing financial regulations.
The proposal is not an immediate call for tougher rules but rather an invitation for regulators to assess whether the existing framework remains fit for purpose.
Commenting on the review, Jonathan Herbst, Global Head of Financial Services at Norton Rose Fulbright, said the recommendations reflect the need for regulation to evolve alongside technological innovation.
"That's a big question for policymakers and one that will only become more pressing as AI adoption accelerates."
The FCA noted that it is the first financial regulator globally to undertake a comprehensive review of artificial intelligence's impact on the financial services industry, although it is not obligated to implement the report's recommendations.
Concerns Over Growing Dependence on AI Providers
Beyond consumer protection, the review also highlighted broader risks associated with the financial sector's increasing reliance on a limited number of AI developers, cloud providers and technology platforms.
A recent industry survey cited in the report found that 81 per cent of financial institutions worldwide have adopted AI in some capacity, with around 40 per cent already deploying more advanced AI applications.
Although most organisations currently use AI for lower-risk internal functions such as administrative processes and back-office operations, British financial firms are increasingly introducing the technology into customer-facing services, including complaints management and investment guidance.
According to the review, widespread dependence on the same AI models and cloud infrastructure could create systemic vulnerabilities across the financial system.
The report warned that shared reliance on a handful of providers may lead to correlated behaviour, reduced market diversity and common points of operational failure if those systems experience disruptions.
The review comes shortly after Bank of England Deputy Governor Sarah Breeden also called for AI-specific regulation, warning that existing financial oversight frameworks were not designed to accommodate autonomous AI systems capable of making independent decisions.
"Our frameworks were not built to contemplate autonomous agents, and relying on a human in the loop for all agent actions is unlikely to be realistic," Breeden said.
The latest recommendations underscore the growing debate among regulators over how to encourage AI innovation while ensuring consumers and the wider financial system remain adequately protected as the technology becomes increasingly embedded in financial services.