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Playing by the Rules: Using Artificial Intelligence to Ensure Compliance


Playing by the Rules: Using Artificial Intelligence to Ensure You Remain Compliant

In the United States, regulatory agencies have consistently worked to protect investors from fraud, placing a high amount of pressure on financial advisors to remain transparent and ethical. Over time, the body of regulation continues to grow, meaning that financial institutions are devoting more time and resources to compliance.


To provide some context, Open Secrets reported that 1,371 financial institutions lobbied the Dodd-Frank bill during its legislative process, and following the implementation of the “Conflict of Interest Rule” on fiduciary investment advice, the Department of Labor (DOL) reported 3,134 letters commenting on the rule from stakeholders. It is clear from the numbers that compliance is an increasingly important issue in the wealth management industry, especially as more and more consumer information is stored online in the cloud. Financial advisors need to maintain their clients’ trust.


The Securities and Exchange Commission also makes data regarding financial advisors’ track records available to the public, meaning that through tools such as Broker Check, investors can complete checks on advisors’ reputations and make informed decisions when it comes to who they trust to invest their wealth.


Artificial intelligence (AI) should be leveraged to provide wealth management firms with access to the most recent legislation. Imagine not only being able to inquire as to the most recent rules and regulations, but a virtual assistant that can actually alert you if a specific trade or decision is going to be non-compliant. We at CogniCor want to provide wealth management firms with virtual assistants that will assist their advisors when it comes to compliance to save time, money, and avoid litigation down the road.


Artificial intelligence can be leveraged to assist service centers and advisors themselves with sifting through obsolete data and understand the most recent and up to date rules to follow. Between the Securities and Exchange Commission and FINRA, a government-authorized not-for-profit organization that oversees U.S. broker-dealers, there is a myriad of information online regarding best practices, licensing, and statistics on advisors’ track records. Advisors should take advantage of AI to organize the data and ultimately ensure they are working in their clients’ best interests at all times.


Specifically, it could meaningfully enhance the search, access and ease the adoption of rules/regulations by all players in the ecosystem. The cost of compliance could meaningfully reduce as a result of uniform taxonomy - a benefit that could well be passed on to investors.


AI can help represent the taxonomy using ontology/knowledge graph tools. Delivery of uniform content within a digital assistant platform for investors, brokers/advisors and other partners would allow for easy access and checks. The capability set could automatically check compliance for any firm large or small, and even proactively alert the existence of a regulation associated with an activity such as distribution.


The phenomenon is not something we’ve invented - what is termed ‘regtech’, the use of technology to ensure regulatory compliance, is something that large financial institutions have been seeking to harness given the amount of savings it can provide. According to the Global Trade Review, in the United Kingdom, regtech could save financial institutions up to £2.7 billion annually if they were to take advantage of artificial intelligence in anti-money laundering systems alone. Imagine the savings that could be had by investing in cognitive virtual assistants that are experts in financial regulation and constantly being updated and renewed in real-time.


Not only can virtual assistants assist advisors with ensuring regulatory compliance, but they can actually help firms affect regulation as it is being formed. The time and resources saved by implementing a virtual assistant mean that your firm can dedicate said resources to research and time on the hill, influencing decision-makers through lobbying rather than spending time and energy trying to stay on top of the legislation as it is passed. Firms need to invest in order to get the best results for the time they spend dealing with regulatory issues.


Contact us today to learn about how CogniCor's solutions can assist with your practice's compliance.

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