The regulation of online advisors, often referred to as “robo-advisors”, continues to be a hot topic in the financial services industry. Online advisors are digital wealth managers which generate investment recommendations and automatically invest and rebalance funds based on an investor’s risk tolerance. The low cost of online advisors and their widespread online availability have made their offerings particularly attractive to investors between the ages of 18-34 – i.e. millennials. 

The transformative potential of online advisors in the wealth management industry has international scope. Regulators around the world have taken notice. In principle, regulators have suggested that the registerable activity of investment selection and delivery of investment recommendations or asset allocation models is technology-neutral. This means that the same registration, know your customer (KYC), and information requirements of traditional wealth managers also apply to online advisors.

Regulation of online advisors is highly relevant to market participants interested in expanding to other jurisdictions as well as incumbent firms. International regulatory trends are also relevant to consumers because they influence which financial products become available for retail investors in the future. The following provides a quick snapshot of the latest global developments in this field:

North America

The Canadian and American markets have slightly different approaches with respect to the regulation of online advisors. In the United States, firms providing investment advisory services are generally registered as investment advisors with the Securities and Exchange Commission and other state securities authorities. In Canada, only online advisors with a “current registration” with the Canadian Securities Administrators are allowed to advise or deal in securities. For more information on the regulation of online advisors in North America, please see our previous blog post.

The main trend in the North American online advisor market has been the development of increasingly sophisticated products which may fall into different regulatory buckets. For example, offering individualized portfolios in conjunction with a stock trading app or chequeing account. Whether a novel product offering falls under the jurisdiction of additional regulators, such as banking, will be determined based on the product characteristics. 

United Kingdom

The United Kingdom’s Financial Conduct Authority (“FCA”) has paid careful attention to the market for streamlined investment advice. In September 2017, the FCA issued Guidance FG17/8 which covers both automated advice services and traditional in person advice models. Guidance FG17/8 sets out the FCA’s expectations for the development of streamlined investment products. Firms are expected to consider the target market for the product offering, the needs of clients the service is directed to, as well as a client’s risk tolerance.

Following the release of Guidance FG17/8, the FCA conducted a review of the automated investment services sector. The review examined both firms providing online discretionary investment management (“ODIM”), where a firm invests on a client’s behalf, and firms providing retail investment advice through automated channels without a human intermediary. The FCA found that most ODIM firms surveyed provided unclear service and fee-disclosures. For example, some firms highlighted non-advised services as favourably priced compared to discretionary advice services without explaining differences in the nature of the services offered. At the conclusion of the review, the FCA issued feedback letters to the firms involved. These letters induced some review participants to substantively change their practices.


In September 2018, the European Banking Authority (“EBA”), European Insurance and Occupational Pensions Authority (“EIOPA”) and European Securities and Markets Authority (“ESMA”) jointly published a report on automation of financial advice. The report notes that the automated financial advice market remains limited and that many of the automated services on the market are being offered via partnerships with incumbent players. National regulators identified a lack of digital financial literacy as a potential barrier to the development of the market.

Regulatory complexity is also a barrier to the functioning of the European market. Regulators in Germany, the NetherlandsLuxembourg, and Sweden have issued policy documents on online advisors. Other national regulators have initiatives in place to work with online advisors and other players in the automation of financial services. In such a complex environment, the principle of technology-neutral regulation becomes particularly important to facilitating innovation because it means the regulatory framework is consistent for both incumbents and new entrants. The EBA, EIOPA and ESMA have pledged their support towards the principle of technology-neutral regulation on an EU-wide basis and support for technology-neutral regulation can be found in policy documents at the national level.


The Australian Securities and Investments Commission has issued guidance on providing digital financial product advice to retail clients (the “Australian Guidance”). The Australian Guidance is consistent with the regulator’s approach of adopting principles based regulation that operates in a technology-neutral manner.

The Australian Guidance covers the requirements for obtaining an Australian financial services licence, which applies to anyone providing financial services such as product advice. While merely stating factual information is not considered to be product advice, a recommendation, opinion, or report that can reasonably be regarded as being intended to influence a client in making a financial decision is considered financial product advice. This means the vast majority of Australian online advisors need an Australian financial services licence to do business. Moreover, many online advisors will also be covered by conduct and disclosure obligations relating to providing advice to retail clients.


Asian regulators are also weighing in on online advisors. For example, Hong Kong’s Securities and Futures Commission recently published Guidelines on Online Distribution and Advisory Platforms (the “Hong Kong Guidelines”). The Hong Kong Guidelines require that online advisors have a “suitably-qualified person” test, review, and ensure the reasonableness of advice provided on their platforms. For example, an investment manager can be consulted in the design of an algorithm for an online advisor. The Hong Kong Guidelines also require firms to provide clients with “clear and easy to read” explanations of how their investment is being generated and how algorithms are used.

In October 2018, the Monetary Authority of Singapore (“MAS”) issued Guidelines on Provision of Digital Advisory Services (“the Singapore Guidelines”). The Singapore Guidelines contain several allowances to facilitate digital advisory services. First, it is easier for digital advisors to obtain licensing with the MAS even if they do not meet corporate track record requirements. As long as the digital advisor has board or senior executive experience in fund management and technology, undertakes an independent audit after one year, and follows a non-complex investment scheme, the licensing requirements are relaxed. There are also exemptions from the requirement to collect exhaustive information on a client’s financial circumstances available to qualifying online advisors.


Complying with a myriad of laws, regulations and guidance from around the world can prove to be a daunting task. For this reason, rather than simply supplanting traditional investment management, online advisors are frequently playing a complementary role and often partnering with incumbent players. Regulators are trying to craft technology-neutral rules which do not hinder innovation, but still protect investors. For this reason, it is prudent for stakeholders to proactively seek experienced counsel when dealing with regulators.