An Examination into the Investor Protection Properties of Robo-Advisory Services in Switzerland

Abstract

This article investigated the extent to which the information provided by Swiss-based robo advisers (RAs) on their websites has been conducive to retail investor protection. Text data from eleven RA websites were collected, categorized and analyzed. Findings identified various weaknesses. The nature of the services provided by RAs was unclearly conceptualized. Information on the risks of investing was poorly presented in those websites relative to information that promoted benefits. Disclosures on the workings of automation and algorithms was on average insufficient. Although the websites’ content showed that RAs were reasonably focused on satisfying the customer’s best interest, the information made available fell short of reassuring customers. These shortcomings are expected to be remedied, at least in part, following the recent entry into force of the Swiss Financial Services Act (FinSA). Compared with the MiFID II regime, however, FinSA has regulated the conduct of investment advisers and portfolio managers more leniently. It is therefore difficult to see how Swiss-based RAs can strive to dispense the higher MiFID II protection level without recourse to substantial doses of voluntary information disclosures.