The Financial Services Institute (FSI) is urging regulators not to rush into sweeping new rules governing AI. In a new white paper on AI in advice and supervision titled “Artificial Intelligence: Balancing Innovation, Interoperability, and Oversight,” FSI argues that existing frameworks such as Regulation Best Interest and fiduciary standards already cover most investor protection concerns that AI raises.
“AI will transform how firms operate and how advisors serve their clients,” said Bob Coppola, a lead of FSI’s AI Task Force, which developed the paper, and Chief Technology Officer at Sanctuary Wealth. “[B]ut as the AI landscape rapidly evolves, as an industry we need to align on standards that support innovation, transparency, security and responsible use.”
Instead of broad AI mandates, FSI calls for a principles-based approach that clearly defines higher risk use cases. The paper warns that vague categories such as “covered technology” or “investor interaction” could pull in everything from basic analytics to routine communications tools, creating unnecessary cost and confusion for firms and advisors.
“As we continue to navigate this new AI era, it is essential that our industry has clear, practical policies and practices in place to adopt these tools responsibly and effectively,” said Dale Brown, FSI President and CEO. “AI has the potential to streamline processes and enhance the client experience, allowing our members to focus on what they do best – serving their clients. However, it is not without its risks and requires thoughtful implementation and collaboration across the independent financial services industry to achieve successful adoption and ensure investor protection.”
FSI also urges policymakers to scale oversight to the risk of the use case, support regulatory sandboxes and pilots, and harmonize state and federal privacy rules so that tools like AI notetakers can be deployed without running afoul of conflicting standards.
The trade group pairs its policy agenda with an operational roadmap for firms, including an AI scoring framework and an interoperability model to help systems share data more safely and efficiently.
James Miller, Contributing Editor and Research Analyst at Wealth Solutions Report, can be reached at ContributingEd@wealthsolutionsreport.com.
