1. Check if the robo-adviser has a license
Just like human intermediaries, robo-advisers advising on securities or futures in Hong Kong are required to be licensed by or registered with the SFC. You can check the SFC’s Public Register of Licenced Persons and Registered Institutions to see if the robo-adviser is licensed by the SFC before using its services.
2. Know more about the robo-adviser
Understand the scope of services, limitations, and risks of using the robo-adviser, e.g. how the algorithms operate, any limitations of the algorithm, how the rebalancing mechanism operates and associated risks, degree of human involvement and how the robo-adviser handles major market events, e.g. financial crisis. In particular, where a robo-adviser provides goals-based advice (such as planning for education of children), you should be aware that it is not providing comprehensive financial planning services to you.
3. Provide accurate and sufficient information
Information about the client is central to the provision of suitable advice by a robo-adviser. Investors should provide accurate and sufficient information in order to enable the robo-adviser to provide, in return, appropriate investment advice that is suitable for the client in terms of client’s personal circumstances, e.g. financial goals and risk appetite etc. Where there is a change in your personal circumstances, you should inform your robo-adviser appropriately and as soon as possible.
4. Pay attention to the investment advice
If you have any questions or are not sure whether the advice is suitable for you, you should ask the operator of the robo-adviser or seek professional advice. If you are not comfortable with the robo-advice, then you should not proceed with it.
5. Check the fees
Understand the fees, in particular whether the robo-adviser will charge an all-in advisory fee or it adopts other fee schedules e.g. fund subscription fee, trailer fee (also known as trailer commissions – click here for more details), switching fee, redemption fee if applicable. Also, don’t forget to understand the fees of the underlying investment, e.g. the fund management fee charged by the fund managers etc.
4 April 2019