The challenge of robo-advisors

Zsolt Ződi, the Institute’s senior research fellow presented about the robo-advisors on the SOLAIR (Society, Law, Artificial Intelligence and Robotics) conference in Prague. Robo-advisors are online platforms that use algorithms to automatically build and manage clients’ portfolios with very limited human interference.

Recently there are more than 200 robo-advisory services in the US, and a few dozens in Europe. Their advantage is, that they decrease the cost of advice, and therefore can provide a wider and easier access to financial services for customers having lower income. But they also generate new risks: for example it is more difficult for consumers to understand key information about advice provided to them by an automated tool.

But the biggest challenge is, that how the regulation should handle these advisory services. The recent regulatory framework, (the consumer protection rules of MiFID 2) is designed for investment firms, and human advisors, and applying some of these rules to robo-advisors is senseless, or very unreasonable. Some of the problems are peculiar to the robo-advisors, but others are present in every field, (healthcare, autonomous cars, automated credit and HR decisions, profiling, etc.) where autonomous agents will be the part of our life. The presentation shortly addressed these problems.

Link: http://solairconference.com/program/