Much is happening in the compliance and regulatory space this year. The Financial Services Institute’s annual OneVoice conference in January set out new initiatives, such as regulatory modernization, and continuing initiatives, including independent contractor classification, regulation by enforcement, the standard of care mandated for advice, and investor education and protection.
Tim Stinson, Chair of the FSI’s Board of Directors and President of Cetera Advisor Networks, predicted that regulators will address new technologies such as AI and cryptoassets.
Stinson’s predictions are only the tip of the iceberg. Technology is changing the compliance and regulatory space for wealth management rapidly, both for firms utilizing new technologies and for the SEC, which will not only address technological change but also may use AI for its own purposes at some point.
Regtech For Efficiency
Kylee Beach, General Counsel at Orion, said that regtech isn’t just necessary – it can actually become a competitive advantage.
“The proper regtech is not only becoming table stakes to running an effective compliance program, but the right regtech can actually foster a competitive advantage by allowing you to do so much more in less time,” Beach says, “leaving you more time to focus on serving your clients and less time in manual, tedious processes that are also prone to error.”
Sindhu Joseph, CEO and Co-Founder of CogniCor, foresees an efficiency boost for wealth management firms.
“The utilization of agentic workflows can help address regulatory requests requiring vast accumulation of data from multiple sources,” Joseph said. “The use of these tools has already reduced errors and time spent on these often-arduous requests.”
She added, “By building regulatory requirements into a contract lifetime management systems or communications reviews, firms can drive significant efficiencies and ensure compliance.”
In a similar vein, Sid Yenamandra, Founder and CEO of Surge Ventures, said, “Regtech is transforming wealth management by automating compliance tasks, improving efficiency and reducing errors.”
“With advanced analytics and machine learning, regtech solutions enable wealth managers to make better decisions, lower costs, and meet evolving regulatory demands,” he said.
Yenamandra explained further: “Machine learning algorithms will analyze vast datasets for early risk detection and compliance monitoring. These tools will help firms stay ahead of regulatory changes, improve decision-making and reduce manual intervention, ultimately boosting efficiency.”
Regulatory Frameworks Will Adapt
“In 2025, regulatory frameworks will become more integrated, leveraging technology for real-time compliance monitoring,” Yenamandra said. “Enhanced data privacy standards and cross-border regulatory collaboration will likely increase.”
Yenamandra also believes that predictive analytics will become prevalent.
Joseph expects more AI-enabled regulatory response modules this year, as well as an increase in contracts and communications management.
“In the more distant future, I expect that regulators will use AI proactively to address fraud and other illicit activities or mistakes in real time,” she said.
Regulatory Focus For 2025
Joseph expects regulation in 2025 to mitigate response bias, address the use of client data for training large language models (LLMs) and require evidence and traceability for predictions.
“Regulation should be one step behind innovation,” Joseph says. “Wealth management is a highly regulated industry and use of AI won’t change that. Early adopters do not fear regulatory action when exploring the opportunity to achieve growth, efficiency and scale with emerging technology.”
Yenamandra expects regulators to focus on transparency, accountability and ethical AI use this year.
“Regulators will likely prioritize developing frameworks to mitigate biases and ensure that AI applications in financial services remain fair and compliant,” he says. “Expect clearer guidelines on data privacy, model transparency and auditability.”
“Under the direction of the current administration, I believe it is highly unlikely that we will see new AI regulations get adopted in 2025,” Beach said, although she believes we will see AI in regulatory use.
“That doesn’t mean that the SEC will not review AI usage during examinations or that they won’t bring enforcement actions where AI is being used in a way that breaches an adviser’s fiduciary duty.”
Changing Of The Guard: The New Administration’s SEC
At the OneVoice conference in January, Dale Brown, FSI’s President and CEO, mentioned that FSI had worked with Paul Atkins, who President Trump has nominated to serve as the SEC Chair. Atkins previously served as a Commissioner at the SEC from 2002 to 2008.
If Atkins gets confirmed, “we have confidence we can shape some outcomes,” Brown said.
“While we can only speculate on Atkins’ regulatory agenda, we should expect significantly different approaches to enforcement actions and examinations,” said Beach.
“Prior focus areas were largely imposed through enforcement, amounting to record-breaking sanctions under Gensler,” she continued. “While enforcement will still be active, it may be directed more toward demonstrated investor harm, like fraudsters. Meanwhile, Atkins has long supported examinations to stay informed on industry practices and enhance compliance programs so a heavier focus on examinations may result.”
Julius Buchanan, Editor in Chief at Wealth Solutions Report, can be reached at julius.buchanan@wealthsolutionsreport.com.
