AI-Driven Investing and Use of Robo-Advisers by Retirement Plans

Introduction

This CLE course will discuss regulatory compliance issues for robo-advisers and AI-driven investing, as well as considerations for plan sponsors and fiduciaries related to the use of robo-advisers that provide investment advice and discretionary management services to ERISA-governed retirement plans. The discussion will include review of the governing law for robo-advisers under the Investment Advisers Act of 1940, and review of ERISA fiduciary status and prohibited transaction exemptions. The panel will also provide guidance to counsel for plan sponsors and fiduciaries on mitigating litigation risk and the best practices for selecting monitoring the use of robo-adviser services. 

Description

AI-driven investing, which is increasingly being used by robo-advisers, typically involves varying levels of, or even no, human interaction with clients. While AI-driven investing can provide retail investors with affordable investment guidance, and other services, it presents unique compliance issues under the Investment Advisers Act of 1940 and other regulatory challenges.

For ERISA-covered retirement plans that offer AI-driven investing, via robo-advisers or otherwise, plan sponsors and fiduciaries must comply with ERISA's fiduciary duty requirements, including prudent selection and monitoring of the services, and ensure that the terms of applicable prohibited transaction exemptions are met. 

Counsel to AI-driven investment advisers must be prepared to advise on compliance with the Advisers Act, required disclosures for online platforms, offering materials, and client questionnaires. Counsel to retirement plan sponsors must also be prepared to evaluate these services, contracts, disclosures, and conflicts of interest. Plan sponsors and fiduciaries should develop best practices related to selection and use of robo-advisers and AI-driven investing for their plans, and address ways to mitigate litigation risk.

Listen as our panel guides you through the regulatory compliance scheme for AI-driven investing and robo-advisers under applicable guidance, and discusses best practices.