Noting the proliferation of automated advice, the Financial Industry Regulatory Authority released a report reminding broker-dealers of their digital investment advice obligations under FINRA rules, specifically regarding suitability of recommendations, conflicts of interest, customer risk profiles and portfolio rebalancing.
FINRA Chairman and CEO Richard Ketchum noted in releasing the 17-page report on Tuesday that as robo-advice services develop, "firms need to ensure that the core principles of investor protection – such as understanding and responding to customers' needs and objectives – serve as the foundation of these new tools as well."
A recently released report by Cerulli Associates noted that as a result of the upcoming release of the Department of Labor's rule to amend the definition of fiduciary on retirement accounts, large broker-dealers will seek to serve small balances in individual retirement accounts on a flat-fee and fiduciary basis using developing technology, and that digital advisor platforms may provide a solution for broker-dealers to work with low balances in IRAs.