We find ourselves in the early stages of a technological revolution: the age of artificial intelligence. But the promise of AI is now accompanied by sobering warnings from regulators. Securities and Exchange Commission Chairman Gary Gensler this year warned the financial services industry against the “AI wash”, over-promising and under-delivering to consumers. In this case, Gensler is not wrong. Like most emerging technologies that have come before it, AI holds tremendous promise to change our industry for the better. However, if used improperly, Gensler's warning shot carries tremendous weight and validity and should be heeded by everyone in the industry.

By many accounts, AI stands to reshape the global economy and, along with it, the way those of us in the financial services business operate. According to McKinsey, generative AI will add over $340 billion in value to the financial services sector alone. However, the widespread adoption and inappropriate use of AI has left the financial services industry – and consumers – vulnerable.

In addition to the SEC, the Consumer Financial Protection Bureau and other key federal entities have already targeted the misuse of AI, which, in many cases, means unchecked reliance on the technology. According to a report from Venable LLP, federal agencies' concerns with AI stem largely from the lack of human interaction with it. “While automation can improve efficiency and accuracy, federal partners are concerned that it can also lead to unintended consequences if not properly monitored,” the report states.

For the RIA industry to remain relevant, it must methodically embrace the potential of AI, without overdoing it. By harnessing its power, RIAs can drive efficiency and accuracy in data analysis and risk assessment, enabling firms to make more informed investment decisions and identify potential opportunities. Or, to help advisors automate mundane and time-consuming tasks, streamline operations and improve overall efficiency.

However, heeding the warnings of regulators, it is essential that RIAs strike a balance between using AI to improve business operations and taking into account the pitfalls associated with AI.

First, AI is still in its early stages, and the models on which AI is built may consist of inaccurate or outdated data, resulting in inaccurate responses. Take, for example, the previous iteration of Google's AI-powered chatbot, Bard. An ad debuting the chatbot misrepresented the platform's demo, costing Google's parent company, Alphabet, $100 billion in market value just a few hours after departure.

Google has since rebranded the service to Gemini, but has only seen its reputation and performance issues deepen. CEO of Google recently issued a public apology as its Gemini technology generated racist and insensitive images. The controversy has led some Capitol Hill will call for the disbandment of Google.

Google's experience, combined with regulators' warnings, underscores the importance of people — not AI — driving critical decisions.

As humans, we prefer actual people to make decisions, so there is a sense of responsibility with every action. There is no precedent or protocol, for example, if an AI makes a trading decision that costs a client thousands of dollars or miscalculates a client's financial risk because it doesn't have the most up-to-date information.

In the RIA industry, human interaction is at our core. The unique expertise, sensitivity and personalized touch that RIAs bring to the table are invaluable and cannot be replicated by a computer model. Financial advisors often double as financial therapists, providing emotional intelligence and understanding that AI will never be able to replace.

An AI system is unable to understand the personal motivations and goals that influence people's decisions about money. You don't understand the sacrifice that goes into accumulating enough savings to send your child to college or the gut feeling of learning you've been hit with corporate layoffs. But financial advisors do.

This piece is not meant to imply that AI should not be embraced by our industry. Instead, it should be used strategically to enhance our skills and expertise and increase efficiency. By striking a balance between individualized, human-centered financial advice and AI advancements, we can unlock new levels of financial growth for our clients.

Brad Genser is co-founder and chief technology officer at Farther