Grappling with change – Governance and ethics in AI

AI is advancing rapidly in financial advice, offering new opportunities but also prompting regulatory concern that governance may be behind adoption.

With many advisers using AI tools unknowingly, licensees play a vital role in promoting ethical, compliant use across the industry.

HUB24 is leading the way by integrating governance, privacy, and ethical principles into its AI development, supporting more accessible and trustworthy advice. It is also developing its pipelines (structured way of turning inputs into outputs) so that it can be more confident about the transparency and observability of the models.

The rapid scale and pace of AI-driven change is creating uncertainty across the financial advice industry with regulators flagging there is a risk that governance is not keeping up in speed with AI adoption.

AI is undoubtedly a powerful enabler, offering industry-specific solutions and shaping the future of advice. But as these capabilities are adopted, strong frameworks around governance, privacy, and ethics become essential.

“I have never seen anything move as quickly as this stuff, so it is both unbelievably exciting and hugely scary,” said Jason Entwistle, Director Strategic Development, HUB24. “AI has the power to transform adviser productivity and to make a real impact on the accessibility of advice, provided the right structures and frameworks are in place.”

Advisers use AI more than they know

While there is debate over how many advisers use AI, Vital Business Partners CEO Nathan Jacobsen pointed out that many may be using it without realising. “They don’t know the cyber program on their laptop is using AI,” he said.

According to AGS Financial Group adviser Paul Bolstad, the industry’s caution with AI stems from the fallout of the Royal Commission. “AI would catapult a lot faster, but we’re still very nervous. We check with the licensee before doing anything,” he said.

This cautious approach reinforces the vital role licensees play in risk management and ethical oversight. But can AI also enhance governance?

Leveraging AI to enhance governance

Nick Hilton, Executive General Manager Advice Delivery at Entireti believes so. He sees AI as a tool for improving oversight and quality control, which can lead to better outcomes for clients through increased efficiency. “Principals want to know what’s happening in firms with 30 to 40 staff. That’s where the opportunity lies,” he said.

Arch Capital’s Director Nigel Baker also sees the upside: “AI isn’t pushing clients into the wrong product, it’s giving them the right information so they can make informed decisions. That’s a good outcome.”

AI mostly the realm of the big players

Entwistle noted that in the UK, it is large retail banks, not advice platforms, which are leading in AI. “Big companies are all over governance, privacy, and risk management. It’s a different conversation, they solved that five years ago.”

In Australia, HUB24 is investing in innovation that leverages technology and data to support more accessible financial advice. From the beginning, it embedded governance into its models, knowing that governance and privacy would be key issues.

While the importance of using AI ethically is understood, it is agreed the industry is already working this way as regulated businesses. “AI is no different from any other technology in a regulated space,” said Entwistle. “We need to be confident data is secure, privacy is protected, and we’re doing the right thing.”