An Adviser's Guide to Artificial Intelligence

It is possible to use AI to enhance your business, without all the risk

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An Adviser’s Guide to AI:

How to Use AI to Enhance Your Business, Without All the Risk

What is it?

Artificial intelligence (AI) is a machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations or decisions influencing real or virtual environments. Artificial intelligence systems use machine and human-based inputs to:

  • Perceive real and virtual environments;
  • Abstract such perceptions into models through analysis in an automated manner; and
  • Use model interference to formulate options for information or action.

Despite its recent growth in popularity, AI has been around for a while. Alexa, Siri, Telsa, Apple and most automated customer service platforms have been using machine learning for years.

Tips for Mitigating Risk  

While there are business and regulatory implications associated with AI, it can provide significant business enhancements, when used properly and with the appropriate guidelines in place. 

Advisers would be wise to go ahead and update their compliance programs to address AI usage.  

Consider these following tips: 

  • Make a list that outlines how your firm is currently using AI. 
  • Update Policies and Procedures: Advisers should start by updating policies and procedures to incorporate acceptable uses and prohibited uses of AI, predictive analytics, and related technologies. 
  • Establish Acceptable Uses for your firm.  
  • Establish Prohibited Uses for your firm.  
  • Hold employee training. Educate employees on best practices for using AI, including restrictions on uploading confidential information to large language models.  
  • Conduct vendor due diligence. Conduct thorough third-party review, including an assessment of potential risks and an evaluation of the vendor’s operational stability, data privacy, and cybersecurity practices.  

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