Redefining Fiduciary Duty in the Era of Robo-Advisors

Abstract

Robo-advisors represent the convergence of artificial intelligence and financial services. Their primary function revolves around asset management, with investment advisory services playing a secondary role. While robo-advisors do not alter the fundamental principal-agent relationship between investors and advisory firms, they strengthen fiduciary responsibilities due to the enhanced operational rights over investors’ accounts. Artificial intelligence currently still needs to gain independent legal personality, serving as a tool rather than an agent. The subjects of fiduciary duties should be the operators and developers of robo-advisors. The context of fiduciary duties for robo-advisors has been updated and upgraded due to the incorporation of algorithms. The duty of loyalty primarily focuses on preventing conflicts of interest, with legal norms mandating the disclosure of basic operational logic information, commission sources, the degree of human intervention, and changes that significantly affect investors’ interests. The duty of care requires service providers to conduct comprehensive due diligence, operate algorithms prudently, pay close attention to fund security, and use data cautiously to achieve the best execution of investors’ entrusted affairs.