Generative AI is moving quickly into financial services — analysing documents, drafting client communications, supporting research, detecting fraud and helping advisers serve clients. New Zealand firms are broadly optimistic but cautious, and regulators have made clear that adopting AI does not change a provider’s duties to clients. KiwiGen.AI helps financial advice providers adopt generative AI safely, with governance that keeps pace with the technology.
Understanding Artificial Intelligence in Financial Services
Financial Markets Authority | Te Mana Tātai Hokohoko
The FMA’s research examines how banks, insurers, asset managers and financial advice providers are adopting AI — the benefits they are pursuing, and how they are managing AI risk within existing frameworks. It is research rather than formal guidance, but it is a useful signal of the regulator’s areas of interest for advice providers adopting AI.
AI in financial services
Adoption is becoming mainstream. In the FMA’s research, every financial services provider surveyed was already using AI or planning to, with nine of thirteen already using it in at least one part of their operations. The strongest business cases are improving customer outcomes and operational efficiency, alongside fraud detection, risk management, data analysis and decision support. Customer service is expected to be the next major area of growth.
Most firms use AI to support rather than replace human decisions, and the level of risk depends on what the system does. An internal tool that summarises meeting notes is very different from a system that influences product selection, credit, insurance or advice. The greater the potential impact on a client, the stronger the testing, oversight and accountability arrangements should be — and the FMA is particularly alert to algorithmic bias, discrimination and a lack of transparency in AI-supported decisions.
Mind the governance gap
The main risk is letting adoption outpace governance. Reviewing 624 AI use cases, the Australian regulator ASIC found some organisations expanding their AI use faster than they were updating risk controls — an “AI governance gap”. The risks extend well beyond cybersecurity to inaccurate or misleading outputs, bias, decisions that cannot be explained, clients not knowing AI influenced an outcome, and over-reliance on third-party platforms. A model should not be trusted simply because its results look consistent; the firm must be able to test, monitor, challenge and explain it.
Existing New Zealand obligations still apply. AI does not reduce the need to treat clients fairly, give suitable advice on reasonable grounds, help clients understand that advice, protect confidential and personal information, and maintain appropriate competence and oversight. An adviser should not rely on an AI-generated output without checking its assumptions, accuracy and relevance to the client’s circumstances — responsibility remains with the adviser and the financial advice provider, not the software developer.
Practical steps for your firm
To keep governance ahead of adoption:
- Identify where AI is used – keep a register of approved tools, trials, embedded features and informal staff use, noting what each accesses and whether its output could affect a client.
- Assess risk from the client’s perspective – apply stronger controls where AI influences recommendations, communications, eligibility or personalised advice.
- Review third-party providers – understand data storage, retention, model-training, security, and how the provider handles incidents and system changes.
- Define meaningful human oversight – specify who reviews outputs, what they must check and when results must be rejected or escalated; review must involve genuine professional judgement.
- Train staff and monitor performance – cover confidentiality, privacy, bias, hallucinations and verification, and track errors, complaints and overrides to confirm tools stay accurate and suitable.
Resources:
- Browse our Financial Advisory industry insight articles
- Beware the gap: Governance arrangements in the face of AI innovation (ASIC, Report 798)
- New Zealand’s AI Strategy and Responsible AI Guidance (MBIE)
This page provides general information about AI governance and financial services. It is not legal, privacy, cybersecurity or financial advice, and does not replace the applicable legislation, professional obligations or the research referenced above.
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