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The wealth management industry has changed drastically in the decade since the Global Financial Crisis. Beginning with the launch of Betterment and Wealthfront in 2008, robo-advisors now manage over USD 200 billion in client assets and are expected to manage USD 16 trillion in client assets by 2025. These firms provide automated, algorithm-driven, financial planning services based on investors’ data and risk preferences. Robo-advisors have capitalised on the rush to passive investing by utilising index funds, and by reducing, or eliminating, human involvement in the portfolio selection process, all of which allows them to offer their services at a lower cost than traditional investment managers. The rise of robo-advisors has challenged the traditional definition of what it means to be an investment adviser and led to questions around whether robo-advisors can act as a fiduciary. This chapter begins by assessing the benefits and risks of robo-advisors before moving on to assess the legal and regulatory treatment of robo-advisors in the US and Europe. While current investment adviser legal liability frameworks appear flexible enough to incorporate robo-advisors, rapid advances in artificial intelligence and machine learning may soon necessitate a rethink of liability regimes applicable to robo-advisors.

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