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Description:
This ViewPoint reviews the landscape for digital advice, including the different business models present today, and the existing regulation of digital advice. Digital advisors incorporate computer-based technology into their portfolio management processes – primarily through the use of algorithms designed to optimize various elements of wealth management from asset allocation, to tax efficiencies, to product selection and trade execution. Digital advice is subject to the same regulatory requirements as traditional financial advice, including supervision by the SEC and FINRA in the US, the FCA in the UK, and equivalent authorities in other jurisdictions. That said, appropriate regulatory supervision is important, making it helpful for regulators to explore best practices in digital advice while recognizing that business models and technology will continue to evolve over time. In this ViewPoint, we suggest that regulators focus on five key areas: (i) know your customer and suitability, (ii) algorithm design and oversight, (iii) disclosure standards and cost transparency, (iv) trading practices, and (v) data protection and cybersecurity.
Publication date:
Sep 12, 2016
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Material type:
Whitepaper
