Do Robots Rule Wealth Management? A Brief Legal Analysis of Robo-Advisors

What are the legal duties of robo-advisors in Switzerland?

In this article, we focus on the legal framework arising from Swiss financial market law, contract law and data protection law. We also make a comparison with European law.

We first explain how robo-advisors work and conclude that, contrary to what their name may suggest, they are primarily portfolio managers. As financial service providers, they shall first establish the client’s profile and the investment strategy. They must also provide information on “the financial service personally recommended” (Art. 8(2)(a) FinSA). Therefore, they must explain that the investment decisions are based on algorithms. Nevertheless, they do not have to provide an in-depth explanation of the functioning of these algorithms.

Under contract law, these same duties (establishment of the client’s profile and the investment strategy, duty to inform) arise from the service agreement (Art. 398(2) CO). However, the analysis of civil liability may…