Through its partnership with the Securities Division of the Office of the Secretary of State, Georgia State Law’s Investor Advocacy Clinic (IAC) enhanced investor education with students tackling a cutting-edge technology issue that impacts the security industry – robo-advisers – and creating a resource library.
The securities division partnered with the North American Securities Administrators Association (NASAA) to learn more about these tools, and the clinic played a critical role in evaluating the pros and cons of robo-advising. Under the direction of Nicole G. Iannarone, assistant clinical professor and clinic director, students compiled and analyzed information relating to robo-advisers, which are investment management programs that select and manage individual portfolios.
Robo-advisers, previously called “internet advisers,” have changed significantly since they were introduced approximately 15 years ago. The products have gained in popularity in recent years, but there is relatively little educational and impartial information available. The algorithm-driven digital tools provide investment advisory services to consumers, often without any human interaction.
“Several legal questions arise as potential investors, financial advisers and regulators learn how to navigate this shift in financial investing through robo-advisers. Since the human interaction is diminished, the duties held by the investor and adviser are not as clear,” said Noula Zaharis, director of the Securities & Charities Division. “Legal questions, specifically about fiduciary duty, will continue to arise as robo-advisers become more prevalent.”
Qudsia Shafiq (J.D. ’18) and Majda Muhic (J.D. ’17) worked with the securities division and handled investigatory matters.
“Through general research, Majda and I determined the different business models under which robo-advisers operate and how they function within the financial industry,” Shafiq said. “We also identified key players and looked for potentially problematic regulatory issues and any arguments proposing robo-advisers as fulfilling – or failing to fulfill – their fiduciary duty to their clients.”
Based on their research findings, Shafiq and Muhic co-wrote a series of 11 articles for the IAC blog to help consumers understand what robo-advisers are, explain the fiduciary duty robo-advisers owe their clients and highlight the benefits, downfalls and key considerations for using this type of financial product.