Ethical and Regulatory Considerations in AI-Driven Financial Advisory Systems
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Abstract
Artificial intelligence-powered financial advisory systems have the potential to revolutionize the financial services industry by providing customized, cost-effective, and efficient advice. However, with increasing popularity, ethical as well as regulatory challenges have become the focus point. In this paper, the key ethical concerns related to AI-based financial advice, including fairness, transparency, accountability, and privacy concerns, are debated. Although AI technology has advanced, a research gap in designing frameworks for ensuring compliance of such systems with ethical standards, i.e., removal of bias, interpretability of the model, and consumer trust, has existed critically. Further, regulatory hurdles continue to exist as AI systems operating in the financial industry operate in jurisdictions that have different data protection laws, thus creating disparities in compliance as well as enforcement. Current regulatory frameworks, devoid of coherence, are also not comprehensive enough, lacking the global standards to regulate AI-based financial advisory systems effectively. In this paper, it is emphasized that there is a need for the development of harmonized and clear regulatory guidelines to ensure ethical use of AI systems while ensuring consumer protection simultaneously. Further, it emphasizes the necessity to conduct research on a continuous basis to have a better understanding of the economic and social impacts of AI on financial services, especially in the context of financial inclusion and anti-discrimination. Bridging these research gaps will play a crucial role in the further development of AI technologies that improve financial services while ensuring trust, transparency, and fairness to all the stakeholders. This abstract provides the research gap in the context of AI-based financial advisory systems with a focus on ethical and regulatory issues that need to be addressed to ensure responsible use
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