Advisers must carry out detailed due diligence to understand the consequences and liability that may arise from using artificial intelligence, warns AdviserSoftware.
The group, part of FTRC, said that while AI creates enormous opportunities for advisers, this must be weighed up against the risks.
Its warning follows the rapid rise of Chinese AI company DeepSeek, which became one of the most downloaded apps in the world in recent weeks.
According to AdviserSoftware, the use of DeepSeek raises various risks. These include DeepSeek’s terms of use which transfer substantial financial burdens to users in case of violations, meaning users are required to reimburse DeepSeek for expenses such as legal fees, arbitration costs and fines resulting from their actions.
The firm also pointed out that DeepSeek’s data practices pose “significant privacy risks”, given that all user inputs and outputs are stored on servers in China. Under local cybersecurity laws, companies may be required to share data with authorities upon request.
DeepSeek also has broad usage rights, including licences to store, modify and distribute user-generated content for commercial purposes.
Ian McKenna, founder of AdviserSoftware, said: “AI offers countless opportunities for advisers to streamline the advice process and free up time that can be spent meaningfully with clients, but this must be weighed up against the risks.
“Based on these terms and conditions, anything you put into DeepSeek can be stored indefinitely and used to create content for commercial purposes. The T&Cs give DeepSeek the right to store information, which even extends as far as payment data. Advisers should understand the issues in the context of any AI tool of service they are using. While the points are not exhaustive they identify valuable issues advisers should always understand and document before starting to use any technology service.”
To mitigate issues, AdviserSoftware says advisers should avoid inputting sensitive data, ensure that they consider the implication of data being stored in China, particularly in light of strict data protection laws in the EU and UK, and understand the licensing terms.
Rob Kirk, founder and CEO of Intergen Data, commented: “Financial advisers must be proactive in understanding the implications of AI-driven platforms like DeepSeek. Chasing the latest and greatest tech can be thrilling, but the hidden risks around data privacy, ownership, and liability exposure are significant and should not be overlooked.
“Firms must have a clear risk assessment framework and ensure their AI partners align with the highest standards of security, compliance, and ethical AI use.”
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