Document Type
Working Paper
Date of this Version
12-1-2018
Abstract
This chapter examines the regulatory and market structure concerns raised by automated financial advisors, and arrives at two conclusions. First, the principles-based regulatory approach of the 1940 Investment Advisors Act in the U.S. appears adequate and sufficiently flexible to address the new issues raised by automation, at least for now. Second, there is a pressing need to develop new mechanisms for encouraging investment robo-advisors (and financial advisors generally) to provide high quality decumulation services to their customers, because neither of the two prevailing compensation approaches – assets under management and commissions – provides sufficient incentive at present, and consumers are poorly equipped to evaluate the quality of decumulation services on their own.
Keywords
Investment Advisors Act, decumulation, asset management, regulatory strategy, market structure, roboadvisor
Working Paper Number
WP2018-19
Copyright/Permission Statement
All findings, interpretations, and conclusions of this paper represent the views of the author(s) and not those of the Wharton School or the Pension Research Council. © 2018 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.
Date Posted: 18 January 2019
Comments
The published version of this working paper may be found in the 2019 publication: The Disruptive Impact of FinTech on Retirement Systems.