Advisors, tech leaders to discuss AI regulation, compliance at ADVISE AI

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Federal regulators are monitoring financial firms on how they use and share data through new AI tools, yet it's largely on wealth managers and advisors to stay ahead by self-regulating their adoption and deployment of AI.

"The challenges to financial stability that AI may pose in the future will require a lot of new thinking," said U.S. Securities and Exchange Commission Chair Gary Gensler during his video "office hours." He compared how the AI-assistant Samantha in the movie "Her" forms a romantic bond with her user, who develops a misguided overreliance on the AI — not the kind of thing Gensler wants to see happen in financial services.

"Regulators, market participants, I believe, need to think about what it means to have the dependencies of potentially 8,316 brokenhearted financial institutions on an AI model or data aggregator," he said on Sept 19. "Let's do our best to keep that heartbreak out of our capital markets." 

Regulation and compliance concerns are top of mind for advisors and tech providers who will be speaking at Financial Planning's ADVISE AI conference, the first industry conference solely focused on AI tools, on Oct. 9-10 in Las Vegas. 

READ MORE: 5 things to expect at Financial Planning's ADVISE AI

"Advisors are often late to adopt new technology. Compliance is a real reason why. But advisors can take baby steps to use AI in a way that can help the firm, but remain compliant,"  said Daniel Bernstein, chief regulatory counsel at MarketCounsel, a consultant for advisors.

Bernstein will be speaking during a session titled, "AI and Compliance: What's Allowed, What's Not, and What's Next?" The session includes Sid Yenamandra, founder and CEO at Surge Ventures; Vall Herard, founder and CEO of Saifr; and moderator Marie Swift, president and CEO of Impact Communications.

"Starting these conversations today allows us to shape the future of our industry proactively," said Swift, who noted she will be quizzing the speakers on their regulatory knowledge. "It provides an opportunity to address potential challenges, such as data privacy and ethical considerations, while also exploring the immense benefits AI can bring." 

These discussions at ADVISE AI are especially timely, given the widespread trust issues with AI across regulators, advisors and clients. 

A study of 1,000 adults performed by the FINRA Investor Education Foundation found that while a majority of respondents did not trust AI directly, about 25% said they seek information using financial apps, which may include AI technologies in the background. 

READ MORE: Do investors trust AI with financial statements? FINRA Foundation study offers some surprises

Financial Planning also asked advisors similar questions earlier this year and found only 15% said they'd trust AI to make financial recommendations, versus about half who'd trust it to make predictions on their car or house maintenance needs. 

READ MORE: Advisors trusting AI is hit or miss, Financial Planning survey shows

"Wealth customers are worried about pending AI regulation, data protection and privacy … data security and accuracy as well as concerns that an LLM [large language model] will store and learn their sensitive information and company data," said Michelle Feinstein, general manager and vice president of global financial services at Salesforce. "They are not sure where to start and how to start, which use cases, and how to prove ROI."

Feinstein will be speaking on the conference's "AI and Automation" panel, alongside Amanda Lott, managing director and head of wealth planning and innovation at J.P. Morgan Private Bank; Samuel Deane, president and CEO of Deane Wealth Management; and Shell Black, president of ShellBlack.com, a Salesforce consulting firm. 

Getting safe returns from AI tools will be a dominant discussion during the ADVISE AI, which also includes a panel on "Good Clean Data: The Essential Element in Effectively Using AI." The speakers for that panel are Nexus Strategy's president Tim Welsh; Invent's founder and CEO Oleg Tishkevich; Golden State Wealth Management's founder and CEO Daniel Catone; and Andrew Brzezinski, head of data strategy, business intelligence and advanced analytics at Fidelity Investments. 

READ MORE: Learn data best practices for your firm at ADVISE AI

Another key focus for regulators and others in the industry is how AI tools are used in marketing practices. ADVISE AI will have several panels focused on marketing such as "Using AI to improve and optimize client acquisition" with VastAssembly.ai co-founder and CEO Ian Karnell, Catchlight co-founder and CEO Wilbur Swan, Integrated Partners' Chief Content Officer Matt Ackermann, and Turnqey Labs co-founder and CEO Tyrone Ross.

Rather than AI being generalized as a regulatory risk, Karnell said part of the discussion will be on how different AI tools can be used to ramp up compliance in marketing and client experience. 

"AI is becoming increasingly leveraged to ensure compliance through automated client communication tracking, instant red-flag alerts for potential violations," he said, "and seamless integration with regulatory reporting systems, reducing manual oversight." 

There's still time to register for ADVISE AI, which will be held at the Encore at ​​Wynn Las Vegas.  Check out the ADVISE AI site for discounts on flights and room rates.