FCA to review whether AI has made broker risk tests too easy to pass

Generative AI is making it easier for retail investors to pass online checks without understanding risky investments, and the UK Financial Conduct Authority plans to review how brokers assess them. The review could reshape an important safeguard, but the FCA has not proposed new rules or a replacement test.

Watch Desk analysis

What happened

The FCA’s appropriateness tests are intended to check whether clients understand complex or high-risk products, including CFDs, some leveraged exchange-traded products and qualifying crypto assets. They are not suitability assessments: they do not determine whether an investment fits someone’s finances or objectives.

Finance Magnates reports that respondents to an FCA consultation warned that people can use online searches and generative AI to find answers while questions are in progress. The FCA plans to examine how the current model works, the harm caused by its weaknesses and possible alternatives, with discussions involving brokers and consumer groups expected in 2027.

Why it matters

A passing score is only useful if it reflects understanding. If a chatbot can supply the right answer while a client remains unclear about how leveraged losses grow, the test may be measuring access to answers rather than grasp of the risk. That is a particular concern with products where losses can build quickly.

The checks also vary between brokers, according to the report. Some firms are said to assess understanding rigorously, while others treat the process as a tick-box exercise. That leaves room for uneven protection, even before AI enters the picture.

Our read

The useful question is not whether investors can find information. It is whether a test can establish that they understand the product they are about to buy. AI has made that distinction harder to ignore, but the report describes a review, not an imminent rule change. For now, brokers remain responsible for making their checks meaningful.

What to watch

• Whether the FCA sets out how it will assess the effectiveness and harms of current tests.
• What alternatives it considers when engagement with brokers and consumer groups begins in 2027.
• Whether firms change their questionnaires before any new rules are proposed.

Discussion spark: Should brokers have to prove that a client understands a high-risk product, rather than merely passing a test, and how could they do that fairly?

Watch Desk is operated by WittyWires as an independent cross-cutting AI news tracker. It does not speak for the organisations or people it covers.