Advertising to Clients – Get the Basics Down First

Advertising to Clients – Get the Basics Down First

October 23, 2019

The investment advisory industry is extremely competitive. And while robo-advisory firms often are able to set themselves apart from the industry as a whole, attracting clients still remains a foundational aspect of their business. Last time, Josh discussed building a strong referral base. This week, I want to kick off a series of posts on direct advertising and what to keep in mind when organizing your marketing efforts. As you might imagine, due to…

Compliance with Solicitation: How to Build a Strong Referral Base

October 7, 2019

The saying goes, referrals are the lifeblood of any business. Indeed, all business owners, robo-advisory firms included, strive to provide a level of value and service to their customers such that those customers in turn become advocates and solicitors of the business. Unfortunately, word of mouth referrals alone are not usually enough. Your firm may choose to engage third parties to solicit new clients. Traditionally, these third parties include the likes of broker-dealers, banks, accountants,…

Electronic communications with clients – what to know before you hit “send”

August 14, 2019

If you’re a robo-adviser, chances are you want to create a fully “digital” experience for clients that doesn’t involve sending paper documents. For example, you may want to email clients or communicate with them directly through your firm’s online platform. If you’re going to ditch the paper, the SEC expects you to follow its guidance on the use of electronic media before doing so. That guidance is found in a series of SEC releases published…

Can We Do That: A Case for Early Compliance Intervention

July 31, 2019

So, you’ve decided to launch a robo-advisory firm? Understandably, your first considerations are likely tied to the functionality of your product. Perhaps the final testing of your algorithm is complete, and your attention has turned to how clients will use your product. What will your client interface look like? How will client information be collected? And most important, how will the product be marketed and sold to potential clients? All these considerations, and many more,…

Individual Licensing Requirements for Robo-Adviser Personnel

July 17, 2019

Even though your firm may be registered with the SEC, a state can impose licensing requirements on individuals associated with your firm who (i) have a “place of business” within the state and (ii) fall within the state’s definition of “investment adviser representative” (or “IA Rep”). These requirements should be met before any individuals begin to engage in activities that require licensing. We’ll talk about those activities shortly. First, let’s tackle what a “place of…

Brochure Supplements – How Much do your Clients Know about the Individuals Behind your Algorithm?

June 26, 2019

No matter what form of investment advisory firm you have, completing Form ADV is a necessity. As a reminder, Form ADV is the form used by investment advisers to register with both the SEC and state securities regulators (see our June 12, 2019 post for more detail). Today’s post deals with the particularities of one component of Form ADV, Part 2B or the brochure supplement, and its unique application to robo-advisers. First, we’ll…

Registering your robo-advisory firm – where and how?

June 12, 2019

Before your robo-adviser can accept its first client, it must be registered. Like other investment advisers, robo-advisers have two possible initial registration pathways. They either register with the SEC or they register with the state(s) where they maintain a place of business. Due to the additional complexity associated with state registration, most robo-advisers seek to qualify for SEC registration from the start. Here’s how you can do the same. First, let’s talk about how the…

Providing Advice in a Digital World: Applying the Suitability Standard to Robo-Advisers

June 3, 2019

Applying the Suitability Standard to Robo-Advisers

All investment advisers must provide advice suitable for a particular client based on the client’s financial situation and investment objectives. Traditional investment advisers usually do this after getting to know their clients through conversations and other forms of direct communication. Robo-advisers, by contrast, must accomplish this through other means. Given this universal duty, it’s important for robo-adviser firms to not simply be aware of their fiduciary duty, but to contemplate how their client interaction differs…

Robo-adviser client agreements – are your bases covered?