Making Reg BI compliance easier with AI
Regulation Best Interest (Reg BI) has made compliance a much heavier lift for financial advisors and broker-dealers. It's no longer enough to simply recommend suitable products. Advisors now need to demonstrate that every recommendation is in the client’s best interest, disclose every fee, and manage conflicts of interest.
With regulators like the SEC and FINRA tightening enforcement, the stakes are higher than ever. Financial services firms are facing increased scrutiny around Reg BI, with enforcement actions tripling in the past year after pandemic-related moratoriums were lifted. Recent actions have shown regulators expect significant improvements in sales supervision, and penalties are on the rise—fines for violations can easily reach hundreds of thousands of dollars. But here’s the interesting part: compliance doesn’t have to be a burden. AI is stepping up to automate much of the regulatory work, and Reg BI itself is opening up new opportunities for advisors to build trust with clients.
An Opportunity to Build Trust
At first glance, Reg BI might seem like just another layer of compliance. But it’s also a chance to deepen client relationships. Clients want to know their advisor is genuinely acting in their best interest, and Reg BI is your chance to prove that. By documenting every recommendation and being transparent about fees and conflicts of interest, you build credibility. It’s not just about staying compliant—it’s about showing clients that they can trust you to always put them first.
Enforcement is Stepping Up
The reality is that enforcement is only going to increase. Regulators are aggressively pursuing firms that fail to comply. In 2023 alone, the Financial Industry Regulatory Authority (FINRA) took 22 enforcement actions related to Reg BI violations—up from just eight the year before. These enforcement actions signal that both regulators are cracking down harder on firms that don’t prioritize client interests over sales incentives.
Firms that ignore these warning signs face significant penalties—not only financially but reputationally. Manual compliance processes leave too much room for error. That’s where AI can help.
Making Client-Centric Relationships Great (Again)
The challenge, of course, is that the documentation and oversight required by Reg BI can easily overwhelm advisors. That’s where AI comes in. Instead of spending hours drafting compliance reports and pulling together disclosures, AI automates those tasks. Tools like Investipal's Reg BI Generator can instantly generate key documents by pulling in real-time data—whether it’s client risk profiles, performance metrics, or fee structures. This leaves you more time to focus on what matters most: the client.
Leveraging AI for Deeper Client Relationships
What’s truly exciting about this shift is that AI doesn’t just streamline compliance—it frees advisors to do what they do best: build relationships. With AI taking care of the administrative burden, you can focus on understanding your clients’ long-term goals and offering personalized advice.
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This shift is a game-changer for trust. By spending more time on meaningful conversations and less time on paperwork, you’re able to strengthen relationships, provide more personalized service, and offer greater value to your clients. The result? Deeper trust, stronger loyalty, and more referrals down the line.
The Future: Predictive and Proactive Compliance
But the best part? We’re only at the beginning of AI’s potential. Predictive AI will help advisors not just react to compliance issues but anticipate them. Imagine knowing about a potential compliance risk before it even becomes a problem. AI will give you the tools to proactively manage both client portfolios and regulatory obligations, ensuring that you stay ahead of the game.
Reg BI is more than just a compliance hurdle—it’s a chance to build trust and strengthen your client relationships.
Want to learn how AI can streamline your Reg BI process? Read the full article here and see how Investipal can transform your approach.
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