More than six out of 10 advisory firms have no plans to build or use client-facing artificial intelligence tools or predictive analytics models in the future, according to a new survey of compliance professionals from the ACA Group, a compliance services provider.
In all, 64% of respondents to ACA’s 2024 Investment Management Compliance Testing Survey said they didn’t plan to use such tools, compared to 30% of firms who said they’re not currently doing so but are “exploring or actively building” such tools. Only 2% of firms reported using such tools to “support client investment decisions.”
According to Carlo di Florio, the global advisory leader at ACA Group, firms understand AI is a hot topic on everyone’s minds (including regulators), even if those firms are not focused on developing AI capabilities.
“Much like the rest of us, AI has been emerging into the consciousness of most advisors over the last year or two,” he said. “It is our impression that only the most technologically focused firms were thinking about AI much before then.”
That said, 46% of respondents named AI as a chief concern, a massive boost from the prior year when it wasn’t even listed. But when it came to firms’ approaches to allowing employees to use AI tools and large language models like ChatGPT, 39% of respondents had “no formal” approach in place, while 28% formally allowed their use. (In contrast, 12% of firms had a total ban on AI in place.)
Notably, despite an Examinations Division sweep on advisors’ use of AI, 64% of firms reported they hadn’t taken any action in response. One in five firms reported that AI use policies and procedures had been created or updated, and 11% had reviewed marketing materials to assess AI-related claims
The survey (now in its 19th year) received 595 responses from firms, 44% of which had AUM between $1 billion and $10 billion, with the other respondents relatively evenly represented. Forty-three percent of the respondent firms employed between 11 and 50 people.
The industry’s “hottest” compliance topics were reshuffled this year. “Advertising/Marketing,” last year’s top concern, fell to second place; 57% of respondents named it as one of their top three compliance concerns, compared to 70% the prior year. “Electronic/Off-Channel Communications” took the top spot this year, with 59% naming it as a top-3 concern compared to 35% in 2023. Fifty-two percent of firms named cybersecurity a top issue in 2023, but only 37% did so this year.
More than four out of 10 firms restricted advisors’ communications on business matters to business email and telephone. Sixty percent of firms reported that they were sharing some of the SEC’s recent enforcement actions on off-channel communications with employees for training purposes (83% of firms required advisors to certify they were only using approved methods, though only 19% reported they reviewed employees’ corporate devices for infractions).
Seventy-four percent of firms reported all their marketing and advertising materials (including requests for proposals) went through a “formal” review process. Meanwhile, 55% of firms required periodic employee training on social media policies; 34% permitted reposting social media posts from the firm’s corporate pages without approval; and 28% required employees to seek approval for any social media posts related to the business.
