Computer As Confidant: Digital Investment Advice and the Fiduciary Standard

23 Pages Posted: 21 Aug 2017 Last revised: 2 Oct 2018

See all articles by Nicole G. Iannarone

Nicole G. Iannarone

Drexel University Thomas R. Kline School of Law

Date Written: August 15, 2017


Digital investment advisers are the fastest growing segment of financial technology (fintech) and are disrupting traditional investment advisory delivery models. The computer-led investment advisory service model may be growing particularly quickly due to a confluence of social and political factors. Politicians and regulators have increasingly focused on the standards of care applicable to investment advice providers. Fewer Americans are ready for retirement and many lack access to affordable investment advice. At the same time, comfort with digital platforms have increased, with some preferring electronic interaction over human interaction. Claiming that they can democratize retirement service by providing advice meeting a fiduciary standard at a fraction of the traditional pricing model, robo-advisers hope to capitalize on these social movements and argue that they provide a solution: conflict-free advice to investors with portfolios of all sizes. Though they have voluntarily subjected themselves to the requirements of the Investment Advisers Act of 1940 (1940 Act), questions remain as to how robo-advisers will meet the fiduciary standard required by such registration. The essay recommends a two-pronged approach for the regulation of robo-advisers in the near term. First, existing regulatory tools such as examination, enforcement, and disclosure should be deployed to robustly explore the sufficiency and malleability of their existing parameters before crafting any new regulatory schemes. Second, the disclosure device should be studied to determine whether the intended beneficiary of the disclosure, retail consumers, comprehend the information being disclosed to them and whether changes to the format, delivery, and/or content of disclosures would better protect consumer investors.

Keywords: robo-adviser, robo-advisor, automated investment advice, investment advisers, securities, fintech, fiduciary, robo

Suggested Citation

Iannarone, Nicole G., Computer As Confidant: Digital Investment Advice and the Fiduciary Standard (August 15, 2017). 93 Chicago-Kent Law Review 141 (2018), Georgia State University College of Law, Legal Studies Research Paper No. 2017-14, Available at SSRN:

Nicole G. Iannarone (Contact Author)

Drexel University Thomas R. Kline School of Law ( email )

3320 Market Street
Philadelphia, PA 19104
United States

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