Page 35 - Profile's Unit Trusts & Collective Investments - September 2025

History of collective investment schemes Chapter 1

category emerged in 2008. Global robo-advice
assets under management (AUM) have grown
dramatically and now represent a sizeable segment
of the market, especially in the US.
Robo-advisery platforms fall into two main
categories: “pure” robo-advice services, and
“hybrid” services. The latter allow access to human
adviser services if the user gets stuck or wants
help, and/or include reviews of investor portfolios
or decisions by actual human beings. US-based
Vanguard Personal Advisor Services and Schwab
Intelligent Portfolios are examples of hybrid
services; Betterment and Wealthfront are examples
of pure robo-advice platforms.
The advent of robo-advisers can be seen as a logical progression from the risk capacity and
needs analysis software programmes that have been used by financial advisers for decades.
Given the ubiquity of internet and broadband – and an increasingly computer-savvy population –
a rapidly expanding segment of the investing public feels able to complete such questionnaires
without assistance.
A robo-adviser platform typically requires the investor to complete online risk-tolerance and
risk-capacity questionnaires (see Chapter 6) and makes investment recommendations based on
the investor’s responses.
According to the Financial Sector Conduct Authority’s (FSCA) Fit and Proper Requirements,
robo-advice (or “automated advice”) is defined as “the furnishing of advice through an electronic
medium that uses algorithms and technology without the direct involvement of a natural person”.
In order to comply with the Financial Advisory and Intermediary Services (FAIS) Act, a financial
service provider (FSP) that provides robo-advice must employ at least one key individual who meets
the FSCA’s competency requirements. These include a technical understanding of the algorithms
used in the robo-advice process. An FSP using a robo-advice platform must monitor and review the
automated advice generated on an ongoing basis and ensure it is sound and FAIS compliant.
As more and more firms begin incorporating elements of robo-advice into their online services,
the lines between traditional financial advice and robo-advice may become blurred, especially
where robo-advice platforms provide access to human-assisted online services on a needs basis.

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