Massachusetts: Robos Do Not Meet Fiduciary Duties
The Massachusetts Securities Division has issued a Policy Statement questioning whether robo-advisers can properly undertake their fiduciary responsibilities. According to the Division, robo-advisers “may be inherently unable to carry out the fiduciary obligation” because of their failure to conduct due diligence and their “de-personalized structure.” The Division also asserts that robo-advisers cannot simply disclaim their “central fiduciary obligations” in their client agreements. The Division expresses concerns that robo-advisers fail to consider outside assets, leave it to the client to update critical information, and do not assess whether a client may have diminished capacity.
OUR TAKE: While the MSD’s position is only binding on robo-advisers seeking Massachusetts state registration, we suspect that both the SEC and FINRA will adopt similar positions as they continue to investigate the growth of robo-advisers.