An Examination into the Investor Protection Properties of Robo-Advisory Services in Switzerland

Capital Markets Law Journal, 2020, Vol. 15, No. 4, 489

27 Pages Posted: 25 Jan 2021

Date Written: December 01, 2020

Abstract

This article investigated the extent to which the information provided by Swiss-based robo advisers (RAs) on their websites has been conducive to retail investor protection. Text data from eleven RA websites were collected, categorized and analyzed. Findings identified various weaknesses. The nature of the services provided by RAs was unclearly conceptualized. Information on the risks of investing was poorly presented in those websites relative to information that promoted benefits. Disclosures on the workings of automation and algorithms was on average insufficient. Although the websites’ content showed that RAs were reasonably focused on satisfying the customer’s best interest, the information made available fell short of reassuring customers. These shortcomings are expected to be remedied, at least in part, following the recent entry into force of the Swiss Financial Services Act (FinSA). Compared with the MiFID II regime, however, FinSA has regulated the conduct of investment advisers and portfolio managers more leniently. It is therefore difficult to see how Swiss-based RAs can strive to dispense the higher MiFID II protection level without recourse to substantial doses of voluntary information disclosures.

Keywords: Investment Advice, Robo Advisors, Algorithm, Information Disclosure, MiFID II, FinSA

JEL Classification: K10, K22

Suggested Citation

Mezzanotte, Félix E., An Examination into the Investor Protection Properties of Robo-Advisory Services in Switzerland (December 01, 2020). Capital Markets Law Journal, 2020, Vol. 15, No. 4, 489, Available at SSRN: https://ssrn.com/abstract=3768972 or http://dx.doi.org/10.2139/ssrn.3768972

Félix E. Mezzanotte (Contact Author)

Trinity College Dublin ( email )

School of Law, House 39, New Square
Trinity College Dublin, the University of Dublin
Dublin, D02 X376
Ireland

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