Gary Gensler Calls On Financial Advisors To Disclose AI Conflicts
SEC Chair Gary Gensler has emphasized the risk of financial advisors prioritizing their own interests over those of their clients due to the use of artificial intelligence (AI). In his prepared testimony, Gensler highlighted that predictive data analytics models now have the ability to make predictions about individuals. He expressed concern that if a firm’s optimization function considers its own interests alongside those of investors, conflicts of interest can arise. Gensler urged firms to report situations where their interests may supersede investors’ interests and take steps to eliminate or neutralize these conflicts.
Gensler’s Overall Outlook On AI
Despite his concerns about potential conflicts, Gensler maintains an optimistic outlook on the adoption of AI in the financial sector. He believes that AI analytics and narrowcasting can bring benefits such as greater financial inclusion and enhanced user experience. However, he will be delivering his testimony before the US House of Representatives Committee on Financial Services, clarifying that his views represent his own as the SEC chair and not those of his fellow commissioners.
According to Statista, the AI market is projected to reach a value of $2 trillion by 2030. Gensler previously expressed his belief that AI could contribute to a future financial collapse due to its disruptive potential in financial markets. Nevertheless, he acknowledges that AI has the capacity to make significant advancements in various industries, including finance, healthcare, and scientific research.
Hot Take: Gary Gensler Highlights Risks Associated with AI in Financial Advisory
SEC Chair Gary Gensler’s recent testimony has shed light on the potential risks associated with the use of AI in financial advisory services. He warns that predictive data analytics models have the ability to make individual predictions, which could lead to conflicts of interest if financial advisors prioritize their own interests alongside those of their clients. Gensler calls on firms to disclose situations where conflicts may arise and take measures to eliminate or neutralize them. Despite these concerns, Gensler recognizes the potential benefits of AI in terms of greater financial inclusion and improved user experience. As the AI market continues to grow, it is crucial for financial advisors to navigate these risks effectively while leveraging the advantages offered by AI technology.
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