This episode is also available as a blog post: https://10leaves.ae/publications/adgm/adgm-issues-digital-investment-management-license-10-leaves

Robo-advisors are a class of financial adviser that provide financial advice or Investment management online with moderate to minimal human intervention. They provide digital financial advice based on mathematical rules or algorithms, and use technology to interact with more tech-savvy clients, as opposed to the traditional method of relationship-based advisory. This technology allows investment managers to provide tailored investment management services to clients in a cost-effective and scalable manner.

Why Use a Robo-Advisor?

There are many reasons why investors may choose to use robo-advisors as opposed to a traditional portfolio manager or financial advisor including:

Low fees and no conflict of interest: Many Digital Investment Managers charge significantly lower fees compared to traditional financial advisors. Conflicts of interest are minimized, since there is no bias or pressure to push a certain set of products or solutions.

Low minimum requirements: Most financial advisory firms have higher requirements of initial commitments – usually a minimum in excess of US$ 100,000. Robo advisors have much lower entry requirements (some as low as US$ 1,000) and work on volumes.

Availability: Digital Investment Managers are automated and hence available 24/7.

Prominent robo-advisory firms include https://www.betterment.com, https://www.personalcapital.com, and https://intelligent.schwab.com.

The Financial Services Regulatory Authority, or FSRA, reviews applications from firms who wish to carry out financial services from the ADGM. Their guidance for Digital Investment Managers includes those operating on fully-digital models, and hybrid models. Firms that sell white-labeled technology solutions to wealth managers are not covered since they do not require financial services permissions.