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A few wealth advisory firms have already gotten into trouble for “AI washing,” the practice of overstating the role that AI is playing in their businesses.
All this is happening in a murky regulatory landscape. A few firms have already gotten into trouble for “AI washing,” the practice of overstating the role that AI is playing in their businesses. Last year, the Securities and Exchange Commission settled charges against two small advisory firms, Delphia and Global Predictions, for making false and misleading statements about their purported use of artificial intelligence.
Barron’s Advisor spoke to several advisors and industry professionals about how they are using AI to innovate while steering clear of regulatory trouble. Here’s what we found:
AI use skews younger. A cadre of younger financial advisors is experimenting with new ways to use the technology to boost their productivity and more quickly build their practices. Many are responding to demands from clients. Some 54% of Gen Z and Millennials prefer to work with a financial advisor who uses AI as a tool, according to recent Northwestern Mutual research.
Enforcement risk is real. Brian Hamburger, founder and CEO of MarketCounsel, a consultancy to financial advisors, contends that large firms shouldn’t take any solace from the fact that enforcement actions thus far have been confined to the small practices.
“Regulators will go after relatively unknown firms, because they can extract a very quick settlement from them and use that settlement to inform the industry that there’s a cop on patrol,” says Hamburger, a lawyer who advises clients on legal issues.
Spotlight on AI compliance tools. In June 2024, Finra issued a regulatory notice stating that if a member firm is using Gen AI tools as part of its supervisory system—for the review of electronic correspondence, for instance—“its policies and procedures should address technology governance, including model risk management, data privacy and integrity, reliability and accuracy of the AI model.”
Hamburger says the verdict is still out on how focused the SEC, Finra, and other regulators will be on AI-related violations. But he says that state regulators are already “getting out front of the federal regulators in terms of coming up with rules and requirements pertaining to the responsible use of AI.”
Client data a top concern. For executives overseeing the integration of AI tools into their Customer Relationship Management (CRM) systems, a top concern appears to be the protection of client data. “With anything we are looking to build, it has to be within our firewalls, and our client data must be fully protected and secured,” says Inez Louzonis, head of platforms and capabilities at Merrill Lynch.
Chatbots and virtual assistants can help. Financial advisory firms are rapidly embracing AI-powered chatbots and virtual assistants to handle routine customer inquiries, such as account balances, password resets, and market data. This can potentially free up human advisors to focus on more complex, relationship-driven tasks.
The automation of tasks once conducted only by humans couldn’t come sooner for some. “Over the coming decade, we’re looking at a shortage of around 100,000 financial advisors,” says Leslie Norman, the chief technology officer of Dynasty Financial Partners, a firm that provides a tech platform and other services for roughly 500 independent advisors. “The good news is AI advancements offer a way out, because we see the ability for AI to inject scale into the way that advisors work with their clients, allowing them to serve more clients.”
Next-gen is getting good AI results. Norman contends that Dynasty’s network of independent advisors—who tend to be younger on average than brokers at traditional firms—have been quick to adopt the AI tools that the firm is providing. “Within a given office, there might be some who are using it multiple times a day, and others more on occasion, but overall, the adoption has been high.”
Range is a wealth management start-up that plans to use AI to automate financial advice. Sam Swenson, one of its financial advisors, says its AI tools help him collect and analyze data from clients, build retirement plans, and project taxes. “I’m at least twice as productive in terms of how quickly I can move through data,” he says.
Eric Sontag, COO and president of Wealthspire, believes now that AI is handling client meeting notes and other tasks, part of the junior advisor’s job is gone. He points out that the change gives new employees a chance to focus on building critical soft skills, such as careful listening and persuasion. “You can’t overestimate the importance of the EQ and interpersonal side of being an advisor,” he says.
Guides are available. The certified financial planning industry is taking steps to prepare advisors for dealing with AI, says Elizabeth Miller, a Summit, N.J.-based planner who chairs the CFP Board, which sets standards for the industry. In February 2025, the CFP Board issued a Generative AI Ethics Guide on the proper uses for AI, including summarizing client meeting notes and aggregating client documents, “so long as the information may be kept confidential.”
But Miller stresses that planners must tread carefully when it comes to offering financial advice using AI. “I don’t think AI can yet give an appropriate, perfect asset allocation for everyone out there.”
Learn to combine skills. Patrick Biggs, a New York City-based Morgan Stanley advisor, is a regular user of Debrief, a note taker, summarizer and first-draft communication composer, and other Morgan Stanley AI tools that were built in-house using the firm’s proprietary data but also leverage OpenAI’s chatbot ChatGPT.
However, he says the human element must be viewed as “our North Star.” Success in an AI-driven world, he says, will be “about combining the best of technology and the best of human advice, and delivering it in one seamless client experience.”
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