Can a firm that sells investment portfolios online be called a robo-adviser?

Not all firms selling investment portfolios online can be called robo advisers. A robo-adviser is more than just a digital storefront for financial products. Personalisation of financial advice and discretionary investment management distinguish robo advisers from online investment platforms.

A robo advice firm provides personal financial advice or personal investment advice. They may also manage your wealth through a managed discretionary account (MDA) structure or separately managed account (SMA) structure or individually managed account (IMA) structure, or through a managed account.

So, firms not providing personal financial advice online cannot be called robo-advisers, even if they sell investment portfolios or funds online. That is, firms offering pre-packaged investment portfolios or Exchange-Traded Funds (ETFs) online without providing personalised financial advice cannot be accurately termed robo advisers. Instead, they are usually considered digital brokers, online investment platforms, or self-directed investment platforms.

In other words, while the online sale of investment portfolios, even if in an automated manner, is a component of what many robo-advisers do, it is the personalised advisory process that is the defining feature.

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The activity of providing personal financial advice is highly regulated by the regulatory authorities, and a firm that provides personal financial advice should obtain the necessary licences. So, in effect, every robo advisor must have the licences required to provide personal financial advice.

For example, our firm QuietGrowth provides personal financial advice to retail clients through online web interfaces and mobile apps. So, our firm can be termed as a robo-advice firm. We also manage our clients’ wealth through the MDA structure.

Also read the answers to the related questions:

• Should a firm that does not offer ‘personal financial advice’ be called a robo advisor?
• Does a robo adviser give personal financial advice?

Additionally, you can consider to read the following knowledge resource:

• Conventionalisation of the new term ‘robo adviser’

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