If a firm categorises itself as a robo-adviser, we believe the firm should give personal financial advice. That is, if a firm that identifies itself as a robo-adviser cannot give personal financial advice, then our view is that it cannot be termed a robo-adviser.
Let’s discuss our view in more detail.
Firstly, note that not all firms selling investment portfolios online can be called robo advisers.
A robo advice firm provides personal financial advice or personal investment advice. They typically also manage your wealth through a managed discretionary account structure or separately managed account structure or individually managed account structure, or through a managed account.
Firms not providing personal financial advice online cannot be called robo-advisers, even if they sell investment portfolios or funds online.
The activity of providing personal financial advice is highly regulated by the regulatory authorities, and a firm that provides personal financial advice should get 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 the wealth of our clients through the managed discretionary account structure.
Fintech firms providing financial advice but not investment advice
Then, what about the fintech firms that provide other aspects of financial advice, other than investment advice, for example, answering the query “Which credit card is best for me”? Can we also term them as robo-advice firms?
Well, there are indeed some firms that are automating the various aspects of providing personalised financial advice, such as:
- Which credit card is best for me?
- Which bank account is best for me?
- Which credit card loan should I repay first among my three credit card loans?
Some firms in different parts of the world that provide such online tools or features market themselves as robo-advice firms. As these firms do not provide personalised investment advice, there is an ambiguity whether such firms should also be called robo-advice firms. We opine that if these firms do not provide ‘personal financial advice’, a regulated activity requiring a licence, then they should not be termed as robo-advisers. Note that personal financial advice might include investment advice or not.
Refer to our Robo advice for your wealth management page for more information.
Also read the answers to the related questions:
- Should a firm that does not offer ‘personal financial advice’ be called a robo advisor?
- What is the difference between robo advice, digital advice, and automated advice?
Additionally, you can consider to read the following knowledge resource:
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