Rethinking Automated Investment Adviser Disclosure

15 Pages Posted: 6 Nov 2019

See all articles by Nicole G. Iannarone

Nicole G. Iannarone

Drexel University Thomas R. Kline School of Law

Date Written: December 23, 2018


Today, investment advisers, including robo-advisers, push dense disclosures to consumer investors who may not be able to fully comprehend their import. Tomorrow, robo-advisers and their innovative technology, if embraced by regulators and consumers, can facilitate and cultivate a trusted collaborative relationship between investor and adviser where the adviser learns from the investor and provides education tailored to the investor, helping to solve vexing consumer protection issues and lessen the impending retirement crisis. More and more of us are comfortable making decisions without human involvement and entirely through a digital interface. Despite consumers’ increasing comfort relying upon machines to direct and guide their decisions, most Americans nevertheless lack basic foundational knowledge in finance and investing. Even those Americans who are able to save for retirement lack financial sophistication and may not be able to understanding the complex products in which they are invested. Robo advice may not be the solution for these problems, as robo-advisers present a potential black box problem where the digital investment advisers may not be capable of explanation beyond the information input and advice output. In such a world, it is not only the new technology that should be questioned. The existing standards through which the new technology is regulated should similarly be explored. An understanding of potential benefits and potential harms may provide lessons that better allow us to protect consumer investors and better prepare for the so-called retirement crisis. This essay explores the parameters of the pre-existing regulatory regime as applied to a new landscape of investing with a focus on the key regulatory tool of disclosure. This short essay examines the challenges of delivering appropriate disclosures in a new world of robo-advisory advice. It suggests a reconceptualization of the aim of disclosure to capitalize on robo-advisers’ ability to truly know their clients and shift the burden of investor education from the customer to a fiduciary level adviser capable of tailoring advice and education to each investor at a level she is capable of understanding. The essay concludes with a recommendation: robo-advisers and investor collaboration via an active and iterative disclosure regime that encourages investor comprehension, understanding, and learning.

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

Suggested Citation

Iannarone, Nicole G., Rethinking Automated Investment Adviser Disclosure (December 23, 2018). Available at SSRN: or

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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