The Massachusetts Securities Division released regulatory guidance for investment firms that use a robo-advisory service to manage client accounts, requiring them to disclose more pertinent information on the fees and limitations of the advisors.
The Wall Street Journal discussed what it could mean for investors in the state:
Secretary of the Commonwealth William Galvin said investors need to be made “fully aware of the role robo advisers play in the handling of their accounts and limitations, restrictions and fees.”
Mr. Galvin in the guidance cited “serious concerns” raised by his office around robo advisers’ fiduciary role, a worry that arose when robo-advisory pioneer Betterment LLC halted trading on the morning of June 24 in the aftermath of the U.K.’s vote to leave the European Union. All customer orders were executed later that day.
Earlier this month, Mr. Galvin told The Wall Street Journal that the decision by Betterment to halt trading during the post-Brexit rout put customers “at a great disadvantage.” He also took issue with its decision to inform only financial advisers of the trading suspension, making no disclosures to the platform’s individual customers…
Fees will also be heavily monitored, as fiduciaries are required to minimize fees as much as possible. The state said investment advisers seeking registration in the state will have their fees evaluated.
