Almost 8 out of 10 firms see compliance and regulation, and a lack of a structured due diligence framework, as barriers to AI adoption.

Less than 5% of financial advisers have full AI policy, guidelines, and sign-off, new research shows.

The figures have been published today in the latest report in NextWealth’s Adviser Tech Stack series – ‘Clearing the path for AI in advice’.

In a separate report published today, 73% of wealth managers said AI is critical to the future of their business. The global study from UK wealth management fintech FNZ, 'The AI-Powered Investment Firm', showed 63% of wealth managers agreed that AI will revolutionise the wealth and asset management sector.

Roman Regelman, Group President at FNZ, said wealth managers "are building modern platforms, industrialising data and governance, and using AI to free advisers to do what only humans can do: understand goals, build trust and provide holistic guidance.”

Compliance and regulation are the standout barriers to AI adoption among advisers, alongside a lack of systems integration, according to the NextWealth report.

It showed that 79% of all firms surveyed believe it poses a barrier to adoption, 19% of which view it as a very significant barrier. That rose to 23% for sole traders. 

A lack of a structured due diligence framework was cited by 77% of financial advisers as a barrier to AI adoption in some form.

Chanelle Paynter, associate research director at NextWealth, the author of the report, said: “Firms want proof, not promises. They want plain English explanations of how these models work, where data sits, how it’s tested, and how client detriment is avoided.”

She said firms worry that they may not yet know what the right questions to ask are. They also worry whether providers can provide straight, audit-ready answers to those questions once known.

Ms Paynter says few firms are tackling the bigger changes that could reimagine the advice process: “Our findings point to the reason why. Many of the foundations simply aren’t in place. Firms have rightly chased the quick wins, trialing meeting note-takers and similar tools, taking a tactical approach to adoption.

“Promises that AI will ultimately help to ‘close the advice gap’ by doubling capacity and cutting the cost-to-serve, will be nigh on impossible to realise without core building blocks such as clear governance and policies, reliable data connectivity and integrations, consistent processes and a simple strategy.”

She said providers have a clear role, and it is in their own interests to act. “In a market where more than half of firms are open to changing AI provider within the next year, practical support in the form of governance packs, real integrations, evidence of value will be key in keeping business.”

• The report is based on NextWealth insight and knowledge of the wealth management market as well as dedicated research, including a survey of 200 financial advisers conducted in October, as well as year-on year comparisons from a yearly survey of more than 300 financial advice professionals, plus interviews with eight financial advice professionals representing a range of firms by size.