SEC Updates Guidance On "Robo-Advisors"

The SEC Division of Investment Management (the "Division") updated guidance on automated advisers (or "robo-advisors") that provide services directly to clients over the internet. The SEC Investor Bulletin provided a general description of robo-advisors and outlined issues to consider, such as the level of human interaction and fees, when deciding whether to invest through particular robo-advisors.

The updated guidance recommended that firms providing robo-advisor services comply with their obligations under the Investment Advisers Act by:

• adequately explaining their business models and the scope of advisory services to their clients;
• fulfilling their fiduciary duties using comprehensive questionnaires to gather client information, and providing commentary to clients to explain changes in investment strategy; and