More than half of UK financial advice firms are now testing or trialling artificial intelligence (AI) and regulatory technology (RegTech) to improve efficiency and manage compliance costs, according to new industry research.

The latest Advice Industry Benchmark Report from AI RegTech platform Model Office found that 53% of firms are actively exploring these technologies as the sector faces rising regulatory and operational pressures.

The findings highlight how the Consumer Duty and a growing volume of regulatory change are reshaping business models across the advice market.

The study shows that advice firms are spending two-thirds of their time on business operations, compliance and staff development, with only a third dedicated to client-facing work.

COMPLIANCE COSTS

Firms typically devote between seven and eighteen hours each week to governance, risk and compliance activity, with an average of 13 hours – equivalent to around two months a year – spent on regulatory tasks.

Compliance costs now account for up to 20% of annual revenue, the report found, with many firms concerned about the quality and accessibility of compliance data and the adequacy of external support.

Model Office analysed data from more than 800 retail intermediary advice firms using its RegTech benchmarking and AI heat-mapping tools.

The report identifies AI as both an opportunity and a risk, but notes that firms using RegTech have reduced compliance costs and time by 25% to 30%, rising to 50% when generative AI is applied.

The research suggests RegTech adoption could save firms as much as a month a year in governance, risk and compliance administration, while adding measurable capital value through real-time monitoring and improved data quality.

COMPLIANCE COSTS ARE UP

Chris Davies (main picture, inset), Model Office founder and director, said: “It is great to see advice firms testing and trialling RegTech and AI tools, particularly given the survey results show they are now spending over 60% of time on business and compliance activities rather than client meetings.

“Compliance costs are up from last year, plus one in two unsure on data quality and access, all means they are up against it when it comes to ensuring evidencing compliance and sustainable business practice.”