In an age of Instagram, Instacart, and instant gratification in general, a more tech-savvy generation is looking to a streamlined way to save and invest their money. This is evidenced by the growing number of robo-advisors entering the automated investment management arena as well as the growing AUM managed by these advisors. Earlier this week, InvestmentNews published a story announcing that LPL Financial was throwing its hat into the ring. Other independent broker dealers including Cambridge Investment Research Inc. and Commonwealth Financial Network announced their intentions to have robo-adviser offerings earlier this year. They will be entering a part of the market dominated by relative industry newbies Betterment and Wealthfront and industry mainstays Charles Schwab & Co. and Vanguard with AUM totals of $2.52 million, $2.56 million, $3 billion, and $21 billion, respectively.
While these names and figures may seem intimidating to companies trying to enter this space, fear not. Financial technology, or FinTech, is ever evolving in ways to give the consumers what they want: transparency and ease of investing. This coupled with a change in factors driving the brand loyalty of Millennials leaves the robo-advising world open for everyone with the willingness to take the risk and lead market innovation.
So what should new companies entering the robo-adviser world think about from a compliance standpoint? Having a service that is completely automated and only provided via a website and/or phone application requires that you have sound cybersecurity and privacy policies in place to detect and prevent hacking and identify theft as well has having a customized Terms of Use for advisory clients to acknowledge in order to set the expectation of how your site will work. Your automated program must also take into account how you will verify client identities and check client names against terrorist watch lists in a way that is both affective and is seamlessly integrated into your code. While Red Oak will not create the code for you, we can get your company registered and assist you with the workflow of your software in order to successfully integrate the necessary regulatory requirements. For more information, please contact us at 888.302.4594 or at sales@redoakcompliance.com.
About Red Oak Compliance Solutions
Red Oak Compliance Solutions is a leading provider of intelligent compliance software, offering a range of AI-powered solutions designed to help firms of all sizes successfully navigate the increasingly complex regulatory landscape. Our suite of 17(a)-4/WORM compliant features offer risk minimization, cost reduction, and process optimization capabilities with features that are designed to evolve with our client’s needs. Our flagship advertising review software enables firms to deliver compliant content to the market with confidence, faster. Our Disclosure Management and Intelligence solution simplifies the management of disclosures, while our Registration Management solution automates and streamlines the licensing and registration process, further enhancing your internal processes.