The Compliance Conundrum: Turning Regulatory Challenges into Opportunities

With Purpose-Built AI, Innovation and Regulatory Requirements don’t have to be trade off decisions

As artificial intelligence transforms how today’s advisors operate, the intersection of innovation and regulation presents both significant challenges and remarkable opportunities for forward-thinking firms.  

The AI Revolution in Financial Services  

The adoption of AI within financial services has accelerated dramatically over the past year. According to industry research, 9 out of 10 financial advisors believe AI can help grow their client base organically by more than 20%, with 83% indicating AI will have a direct impact on the client-advisor relationship.

This enthusiasm is well-founded. AI assistants and note-taking tools save advisors considerable time by reducing administrative burdens and streamlining client follow-up processes. The efficiency gains are real—a recent survey found that 76% of advisors report immediate benefits from using AI-enabled tools in their practice, with this number continuing to grow year over year.  

The Compliance Challenge

But this rapid adoption comes with significant compliance considerations. Regulatory bodies like the SEC and FINRA have yet to issue comprehensive guidance on how AI tools fit within existing frameworks, leaving firms to interpret and apply current regulations to novel technologies.

The stakes are high. While 75% of firms are actively using or exploring AI, only 32% have established an AI governance committee, and 92% lack policies governing AI use by third-party service providers—a critical vulnerability in today's interconnected ecosystem.

As the SEC ramps up its focus on AI and cybersecurity, with plans to assess whether firms have implemented adequate policies to monitor and supervise their use of AI, this regulatory gap is a risk for unprepared organizations.

Transforming Challenges into Opportunities

Firms that face potential AI compliance challenges head on, though, position themselves to take a massive competitive lead over those that hesitate to embrace its benefits:

1. Building Trust Through Transparency

When clients understand how their information is being handled, protected, and leveraged through purpose-built AI tools, it builds trust. Firms that implement clear client consent management and disclosure protocols demonstrate their commitment to transparency and client interests.

Rather than viewing compliance as a box-checking exercise, forward-thinking advisors incorporate these discussions into their client onboarding processes, positioning their data security and compliance rigor as a value proposition that differentiates them from competitors.

2. Creating Consistency Through Documentation

AI note-taking features can ensure that client interactions are consistently and accurately documented, addressing a core requirement of regulations like Reg BI. This not only satisfies regulatory requirements, but it also improves service quality by ensuring nothing falls through the cracks.

By implementing policies for reviewing AI-generated documentation, firms can maintain the human oversight that regulators expect while still capturing the efficiency benefits of automation.

3. Enhancing Decision-Making

AI tools can help advisors make better recommendations by capturing more information from conversations which enables the more comprehensive analysis of client needs. This directly supports an advisor’s fiduciary duty to act in clients' best interests.

But not all AI solutions are created equal. Better decision-making relies on better client intelligence. AI notetakers that only generate text might satisfy the documentation requirement, but platforms that turn conversations into structured, searchable, and actionable client intelligence give advisors a distinct advantage. Advisors and firms that have better client insights will be better positioned to deliver personalized service at scale and grow AUM.

4. Competitive Differentiation

According to a recent industry survey, 57% of advisors report gaining clients due to another advisor's inadequate technology. As today’s clients increasingly expect personalized and efficient service delivery, firms that successfully balance technological innovation with strong compliance frameworks will win market share.

The Modern Advisor Cheat Code: Choosing Platforms Built to both Meet Efficiency Goals and Regulatory Requirements

Advisors interested in leveraging AI capabilities to drive efficiencies, better client experience, and growth for their firms, still have a responsibility to meet regulatory standards by:

• Developing comprehensive AI governance frameworks addressing regulatory requirements

• Implementing AI assessment protocols that evaluate data security, algorithmic transparency, and alignment with fiduciary responsibilities

• Creating firm-wide AI usage standards  

• Developing client disclosure protocols explaining how and when AI tools are used

But one powerful way to leapfrog the competition, maintain compliance, and start realizing the benefits of AI exponentially faster is to leverage AI platforms purpose-built for financial services, with the industry’s nuanced compliance and security regulations in mind.

When evaluating AI solutions, look for:

• Enterprise-Grade Security: Look for solutions that meet the highest standards for enterprise deployment, including SOC 2 Type 2 certification and HIPAA compliance.

• No-Recording Documentation: Choose platforms that can develop highly detailed and accurate meeting summaries without creating or storing audio or video recordings. This approach enhances advisor efficiency without sacrificing regulatory compliance, privacy, or security.

• Consent Management Capabilities: Prioritize solutions that can capture and report on client consent for AI use, ensuring transparency and compliance with privacy regulations.

• Personally Identifiable Information Redaction: Look for platforms that can automatically redact PII. But be aware that redacting PII in the transcript and notes is one thing, however, if you are recording, you are still collecting PII.

• Customizable Retention Policies: Select platforms that offer user-controlled data retention policies at the object level with scheduled deletion options. This feature allows firms to maintain compliance with books and records requirements while managing risk.

• Archiving and Supervision of Transcripts: While not a requirement today, look for platforms that already integrate with solutions like Proof Point, Global Relay and Smarsh.

• Structured Data Approach: Platforms that convert conversations into detailed and structured data offer significant efficiency and compliance advantages. This approach makes information more , actionable, and compliant than traditional note taking methods, enabling advisors to leverage client insights more effectively, and give firms more oversight.

• Third-Party Validation: Consider platforms that have been vetted and deployed across multiple advisory firms, including major enterprises. This real-world testing provides assurance of both effectiveness and compliance readiness.

The Best of All Worlds with Zocks: Efficiency, Compliance, and Client Experience  

Built specifically to meet the needs of financial services firms, Zocks empowers advisors with more time and robust client intelligence without sacrificing regulatory compliance, privacy, or security.  

Zocks develops meeting summaries and transcripts without recording audio or video, and generates structured data that helps advisors leverage client insights more effectively. SOC 2 Type 2 and HIPAA compliant certifications further demonstrate Zocks’ commitment to maintaining the highest regulatory and security standards.

Take a closer look at the Zocks platform, or schedule a personalized demo with our team today.

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