The Financial Conduct Authority (FCA) is in an arms race to keep pace with AI’s spread across financial services. Senior official Sheldon Mills said the watchdog needs expanded powers to monitor large language models such as Chat GPT, Claude, and Gemini, which millions use for personal finance advice.

Mills’s report flags hyper‑personalisation as a double‑edged sword: it can match products to needs but also fuels bias, opaque pricing, and personalised manipulation. The study found that 20% of UK adults are willing to let AI replace human guidance on savings or borrowing, exposing a regulatory gap.

The FCA must launch a review within three to six months, expand its “critical third parties” oversight to firms like Anthropic, OpenAI, Amazon, Microsoft, and consider the “designated activities” route to supervise un‑authorised AI‑driven services. It also proposes an AI‑enabled financial capability service to democratise advice for those earning £20,000 a year.

For investors, the expanding regulatory reach means higher compliance costs but also clearer risk signals for AI‑heavy portfolios. Business leaders should audit their AI pipelines, engage with the FCA’s upcoming review, and explore partnerships with regulated providers to avoid being caught outside the regulatory perimeter.