Making robo-advisers careful? Duties of care in providing automated financial advice to consumers

Abstract

ABSTRACT 'Robo-advisers' are digital tools that provide automated, personalised advice to consumers. The uses of robo-advisers, and the sophistication of the technologies behind them, are growing. One field in which robo-advisers have already become prominent is financial services, where they are being used to provide credit, budgeting, insurance and investment advice. Professional advisers are subject to a general law duty of reasonable care, which overlaps with requirements of suitability or best interests commonly imposed under financial services legislation. This article considers how these kinds of duties should be interpreted in applying to financial robo-advisers. It argues that the legal duty of reasonable care for automated financial advice requires regard not only to the risks familiar from human advisers, of self-interested or poorly suited recommendations, but also the risks arising from the use of digital technology in providing advice, including the possibility of misunderstandings in interactions with consumers, and arising from inaccurate, opaque and possibly biased models.