PIMFA
What is Artificial Intelligence?
A recent Financial Conduct Authority (FCA) discussion paper, DP22/4: Artificial Intelligence, offered the following definition of Artificial Intelligence (AI):
‘It is generally accepted that AI is the simulation of human intelligence by machines, including the use of computer systems, which have the ability to perform tasks that demonstrate learning, decision-making, problem solving, and other tasks which previously required human intelligence. Machine learning is a sub-branch of AI.
AI, a branch of computer science, is complex and evolving in terms of its precise definition. It is broadly seen as part of a spectrum of computational and mathematical methodologies that include innovative data analytics and data modelling techniques.’
- WHAT DO FIRMS NEED TO CONSIDER?
Many PIMFA members are already using AI systems and tools in their everyday operations, and it is likely that the adoption of AI in financial services will increase rapidly over the next few years.
PIMFA firms already use AI tools for several purposes. For example, they analyse large volumes of data quickly, easily, and accurately, which enables their employees to spend more time working with and for their clients.
There are concerns that as AI becomes more advanced, it could introduce new risks, for example:
system develops biases in its decision making
leading firms to make bad decisions
rESULTING IN Poor outcomes for their clients
This is why it is essential that firms deploying AI systems have a suitably robust control framework around their AI components to keep a careful check on what they are doing.
As with any innovation, AI has the potential to make fundamental and far ranging improvements in how firms can serve their clients. However, we must ensure it is continually monitored and checked regularly to manage the risk and maximise the benefit.
- What are regulators doing?
A number of government departments are asking regulators such as the Financial Conduct Authority (FCA), Bank of England (BoE), Information Commissioners Office (ICO) and Competition and Markets Authority (CMA) to publish an update on their strategic approach to AI and the steps they are taking according to the White Paper. The Secretary of State is asking for this update by 30 April 2024.
On 13 March 2024, the EU Parliament approved the EU Artificial Intelligence Act. The EU AI Act sets out a comprehensive legal framework governing AI, establishing EU-wide rules on data quality, transparency, human oversight and accountability. It features some challenging requirements, has a broad extraterritorial effect and potentially huge fines for non-compliance.
our latest news
New PIMFA Blog: AI and the Environment: A Double-Edged Sword for the Investment Industry
Whilst a recent survey reveals that 62% of wealth management firms believe AI will significantly reshape their operations, the infrastructure powering AI, such as data centres, poses a substantial environmental challenge, generating vast amounts of e-waste and consuming significant energy.
In this blog, PIMFA’s Senior Policy Adviser, Maria Fritzsche, delves deeper into the problems and potential solutions.
Read the blog here
PIMFA WealthTech and Morningstar launch new Tech Sprint on AI
The rise of generative artificial intelligence (AI) presents immense opportunities for innovation and growth across the sector, but access to high-quality data, robust evaluation metrics, and seamless integration tools remains a barrier for many looking to leverage AI effectively.
To explore this exciting new area and begin to address these issues, PIMFA WealthTech, created by the industry association PIMFA, in collaboration with Morningstar, have launched a new AI Tech Sprint – a competition for fintech firms to showcase their tech capabilities – asking
“How can wealth management and financial advice firms leverage AI to enhance operational efficiency by optimising end-to-end processing across front, middle, and back-office functions?”
An evaluation session will be held on Tuesday 29 April and the winner will be invited to showcase their solution at the Morningstar Investment Conference UK on 7 May 2025.
Click here to register for the Sprint.
Read the full press release here.
FCA and Information Commissioner’s Office (ICO) – supporting AI, innovation and growth in financial services
The FCA and ICO have published a joint letter to trade association chairs and CEOs on supporting AI, innovation, and growth in financial services.
Noting the importance of providing firms with regulatory clarity and certainty around the use of new technologies within financial services, the FCA and ICO will host a roundtable on 9 May 2025 to discuss:
- Areas of regulatory uncertainty firms face in respect of AI adoption and wider innovation.
- How the regulators can provide greater regulatory certainty and support growth.
- Specific areas of data protection and financial regulation to enhance innovation.
PIMFA will attend the roundtable on 9 May. Read the letter here.
Treasury Committee Call for Evidence on AI in Financial Services
The Treasury Committee is launching an inquiry to explore how the UK financial services industry can take advantage of the opportunities in artificial intelligence (AI) while mitigating any threats to financial stability and safeguarding financial consumers, particularly vulnerable consumers.
The deadline for responses is 17 March 2025. You can find more details about the call for evidence here
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