What is robo-advisor investing?

Automated investing platforms, also known as robo-advisors, allow investors to make investment decisions and transact deals with little to no interaction with human advisors. By completing online questionnaires outlining investment goals and financial information, these systems compile and manage portfolios for investors.

Why use a robo-advisor investing platform?

• Directly manage your investment portfolio
• Lower cost alternative to traditional investing
• On-demand deal transaction

When not to use a robo-advisor

Robo-advisor investing may be a great alternative for some, but it may not be the best option for every investor. Depending on your particular investment goals and needs, a traditional investment advisor may be a better fit. Robo-advisor investing can only operate based on personal and financial information provided. Therefore, it can only advise and suggest deals in a limited capacity. Traditional advisor can take a more nuanced approach to your portfolio. Also, as an economical alternative, robo-advisors offer low-cost investment advice. It may not offer truly high-value advice like a human investor might be able to.

Investor Resources

• To view the SEC’s full robo-advisor investor alert, click here
• Check out our blog archives for even more tips for safe investing practices

Settling Customer Disputes

Usually, disputes over securities brokerage/trading are settled through arbitration as opposed to traditional litigation. Though arbitration is the primary form of dispute resolution, mediation may also be used as an alternative. In most contract agreements between securities consumers and broker-dealers, arbitrations are written out as the means of dispute resolution and are subject to the governing rules and regulations of the Financial Industry Regulatory Authority (FINRA).

Arbitration

This process differs from traditional litigation in several ways:

• A neutral arbiter oversees the resolution process instead of a judge or jury
• Arbitrations have a limited grounds for appeal
• Arbiters follow FINRA’s Code of Arbitration Procedure instead of legal precedent
• Documents submitted during arbitrations are not generally made publicly available
• Arbitration is usually more timely and cost-efficient than litigation

FINRA Arbitrations

Several different procedures for arbitrations are addressed by FINRA, based on nature of disputes and value of claims.

• Simplified Arbitration
  • Claims valued under $50,000
  • Least costly method
  • One arbiter assigned to dispute
  • In-person hearings not necessary
• Arbiter Selection
  • Claim value $50,000 or less – 1 arbiter
  • Values of $50,000-$100,000 – 1 or 3 arbiter panel
  • Claims over $100,000 – 3 arbiter panel
  • Read FINRA’s FAQ for arbiter selection process
• Securities Firms Using FINRA Process
  • Bats BZX Exchange, Inc., Bats BYZ Exchange, Inc., Bats EDGA Exchange, Inc. and Bats EDGX Exchange, Inc.
  • BOX Options Exchange, LLC
  • Chicago Board Options Exchange (CBOE) and C2
  • IEX Group
  • International Securities Exchange, LLC (ISE), Gemini and Mercury
  • MIAX Options Exchange (MIAX)
  • Municipal Securities Rulemaking Board (MSRB) (a self-regulatory organization for municipal securities)
  • NASDAQ
  • NASDAQ OMX
  • New York Stock Exchange (NYSE)
  • NYSE Amex
  • NYSE Arca
• Customer Dispute Fees
  • Filing fee assessed based on value of claim. Typically $225-$4,000
  • Hearing session fees based on dispute amount and number of arbiters
  • Arbitrations may be subject to other assorted fees (administrative, adjournment, etc.)
• Filing a Customer Dispute
  • Visit the FINRA Office of Dispute Resolution website to find resources and information on filing a claim
  • Customers usually have 6 years from date of occurrence to file a claim, but other statute of limitations may apply
• Finding a Lawyer
  • Though hiring an attorney is not necessary for an arbitration, customers may opt for legal counsel to navigate the process. This requires an attorney skilled in securities disputes. Savage Villoch Law, PLLC has been fighting for clients involved in securities disputes for over 20 years. Contact us today to find out your options in protecting your financial investments.