This is an interesting question because robo-advisers don’t actually exist. As we explained in our previous post on robo-advisers they are “a class of financial adviser that can provide financial advice or portfolio management online with very little or no human input.” If robo-advisers are algorithms and data used to help clients invest how do you register that?
The robo-adviser don’t create algorithms or run by themselves. This isn’t SkyNet. There’s still a human component, so there’s also registration.
You may see commercials or online ads for a number of robo-advisers such as Wealth Simple, Nest Wealth, or ModernAdvisor. Go to www.aretheyregistered.ca and enter any of those robo-advisors into the registration search and see what you’ll find.
You’ll find that they are all registered separately with all 13 provincial and territorial securities regulators. They have to be registered in every jurisdiction if they want to offer their online services to residents of that province or territory. Their registration category is portfolio manager, because that’s what they’re doing for their clients – managing their portfolio. They may not be providing advice in the traditional sense, but it’s the same outcome.
When robo-advisors began to appear online a few years ago the CSA took notice and decided that a separate registration process was not required. Nor did they provide any special exemptions for robo-advisors. Not only do robo-adviser firms have to follow the same registration process as traditional adviser firms, they also have to abide by the same Know Your Client (KYC) and suitability principles as well. In the registration process robo-advisers must include their proposed KYC questionnaire and information about the processes relating to its use.
The number of robo-advisers has exploded exponentially over the last few years. If you’re thinking about using a robo-adviser do your homework. Check online reviews, check their fees, minimum deposits and the fine print. And, as with any advisor, check registration.