Investment Robo-advisors : Some Reflections on China's Regulatory Experience

Financial advice and investment management are increasingly being provided by automated products called “robo-advisors”. While robo-advisors have been considered as a major breakthrough in the Fintech industry, they present significant challenges for regulators who are rather used to human intermediaries. Some of the challenges include algorithmic defects, qualification restrictions, liability shouldering, false propaganda and black box. These challenges undermine investors’ confidence and the development of Fintech in general. With a particular focus on China, this article explores the nature of robo-advisors, their core components, and the regulatory puzzles surrounding them. The capacity regulators should develop to maximize the technology’s gains. Analysis in this article shows that the existing regulatory framework on robo-advisors in China is too strict and also fails to comply with the twin pillars of financial advisory regulatory framework — know your client and suitability obligation. The article, therefore, offers certain policy recommendations relating to liability system, accountability mechanism, robotic examination standardization, special insurance cover and enhanced user portrait. The article calls for an improved regulatory regime in China that will keep up with the development of robo-advisors and other technology-driven financial innovations in general.