The core question in a new position paper released today by First Ascent Asset Management. Written by First Ascent CEO Scott MacKillop, the paper puts into perspective the ongoing bureaucratic, legal and lobbying debate about how to best regulate the technology and client service breakthroughs that robo-advisers bring to financial services.

From his examination of agency regulations, legal opinions and industry white papers, MacKillop, a former securities attorney, concludes that robos fail to meet the fiduciary duty of loyalty and the duty of care as expressed under the Investment Advisers Act of 1940, and are in fact operating as unregistered mutual funds in violation of the Investment Company Act. 

"The  robos  are  here  to  stay  and  will  continue  to make  contributions  that  benefit  both  advisers  and clientsNow that we have some familiarity with the characteristics of this new set of players, the regulators need to get to work modifying the existing regulatory structure or create a new structure to accommodate them.  The robo foot simply doesn't fit into the fiduciary glass slipper." said MacKillop.

While robo technology has been a powerful positive force in financial services, and its technology benefits will be a part of every financial adviser's practice in the years to come, it would be a mistake for regulators to try and wedge robo-advisers into existing regulations. "If robos are considered fiduciaries, the fiduciary standards that have served the industry so well will be diluted and we'll be opening the gates to allow other less lovable players under the fiduciary umbrella," says MacKillop. 

First Ascent provides outsourced portfolio management services to financial advisors and their clients. The firm works directly with registered investment advisors (RIAs) and advisors affiliated with independent broker-dealers. Its portfolios are also available for distribution through "fund strategist" platforms. The firm's founder, Scott MacKillop, is a 40-year veteran of the financial services industry and has been providing portfolio management services to independent advisors for over 25 years. First Ascent has both an internal investment group and an independent, outside investment committee to bring an added level of objectivity and fresh perspectives. Collectively, the team has over 200 years of experience