What is generative AI?

Definition

Generative AI is AI that produces something new instead of just scoring or sorting. Give it a prompt, a transcript or a PDF and it writes a summary, a draft email, a chart description or an answer to a question.

Chat assistants like ChatGPT, Claude and Gemini are generative AI, and so are the AI features inside notetakers, CRMs and marketing tools. Our AI policy template defines it the same way: an AI tool that produces new content in response to prompts, documents or other inputs.

Why it matters for advisors

Generative AI is behind most of the time savings advisors talk about: meeting notes, follow-up emails, plan summaries, first drafts of marketing. It's also behind most of the new compliance questions, because its output can be wrong, can contain client data and can be a communication you have to review and keep.

FINRA's Regulatory Notice 24-09 says its rules apply to generative AI just as they apply to any other tool, and its 2026 oversight report says the top use case among member firms is summarization and information extraction.

Example

An advisor uploads a client's estate documents to an approved AI tool and asks for a one-page summary. It saves an hour, but the advisor checks every name, date and dollar figure against the originals before it goes in the file.

Watch out for

Generative AI can produce confident, fluent text that's wrong. That's called a hallucination, and it's why a person reviews anything that goes to a client.