What Investment Advisers Need To Know About AI

Artificial intelligence ("AI") could significantly alter the landscape for investment advisers, bringing with it the potential to quickly develop personalized investment advice using large amounts of unstructured data, provide automated regulatory compliance processes, and simplify communication about investment performance with investors. The implementation of AI could also introduce high-risk issues for registered investment advisers, including with respect to their fiduciary duties to investors and confidentiality concerns. The SEC is paying close attention to the use of AI by RIAs, having proposed a new rule in July 2023 to address conflicts of interest raised by predictive analytics and having conducted a sweep of RIAs in August 2023 to learn more about current uses of AI by private fund advisers. As RIAs explore the use of AI to enhance their investment advisory services, they should be mindful of the potential legal, regulatory, and practical risks presented by