What is artificial intelligence?

Definition

Artificial intelligence is a broad label for software that does things we'd normally expect a person to do: read and write language, recognize speech, classify documents, find patterns in data or make predictions. FINRA describes it as a wide-ranging term that generally means the capability of a machine to imitate intelligent human behavior.

Most AI in an advisory firm today is one of two kinds. Older machine learning models score, sort and predict (fraud alerts, lead scoring). Newer generative AI produces new content: meeting summaries, email drafts, plan explanations.

Why it matters for advisors

The word "AI" now appears in almost every vendor pitch, from CRMs to planning software. For a firm, the useful question isn't whether a product "has AI" but what the AI actually does with your data and who checks its work.

Regulators treat AI as technology that existing rules already cover. FINRA says its rules are technology neutral, and the SEC has brought cases against advisers that overstated their AI use. So both what you buy and what you say about it matter.

Example

A vendor says its CRM is "AI-powered." On a demo, the AI turns out to be a feature that drafts follow-up emails from meeting notes. That's the thing to evaluate: where the notes go, how accurate the drafts are, and who reviews them before they're sent.

Watch out for

Don't describe your own firm as "AI-driven" unless you can show what that means. Overstated AI claims are what the SEC calls AI washing.