The Duty is without a doubt the most broad and wide-ranging piece of legislation we’ve seen and is intended to ensure that the best interests of consumers in financial services are considered foremost by firms. As such, the Duty should be welcomed by the industry.
However, this presents challenges for firms trying to show adherence, including how to balance an enhanced compliance framework with the associated cost of these increased compliance activities.
In parallel with the rollout of the Duty over the last year, the world of technology has seen significant advances in the evolution and widespread adoption of generative artificial intelligence (AI) – including easy-to-use tools such as ChatGPT and MidJourney.
This technology has now made its way into the mortgage industry – with Koodoo’s proprietary large language model (KoodooLLM) demonstrating the capability to pass all three modules of the CeMAP exam.
The human touch is still needed
We do not expect this new technology to replace advisers.
Instead, this technology is being developed to enable advisers to spend more time on quality advice, and less time on administrative tasks. However, the technology can also provide an operational shift for mortgage compliance teams.
The technology that we are developing will enable a firm’s compliance team to have 100 per cent of all calls checked by AI first, and calls with a higher risk of procedural mistakes are triaged for human review and remediation if required.
We know that the Financial Conduct Authority (FCA) has already started using AI internally to support ongoing firm monitoring from Nikhil Rathi’s speech on the technology in July this year.
Koodoo has always maintained a close and healthy relationship with the team at the FCA. And my personal opinion is that the FCA is cautiously welcoming of this technology, as if used correctly, it could dramatically support the industry in addressing the objectives of the Duty in a manner which is not cost-prohibitive for firms to adopt.
My expectation is that by the end of 2024, AI will be a critical tool in any firm’s approach to addressing the Consumer Duty, and those that do not embrace AI as part of their approach may find themselves with a less robust compliance framework and a higher cost base than their AI-enabled competitors.
