An increasing number of undertakings are offering financial instruments online. These kinds of securities services are generally subject to the same requirements as services provided through branches or by telephone, for example. This also applies to investment advice and portfolio management.

The automated distribution of financial instruments and similar digital services – also known as robo-advice – generally meet the definition of investment advice and therefore require authorisation under banking or industrial law. If such authorisation has not been granted or if the associated requirements of the German Securities Trading Act (Wertpapierhandelsgesetz) or of the German Industrial Code (Gewerbeordnung) are not satisfied, the providers expose themselves to a considerable legal risk. Even though many new offers are coming onto the market, it is therefore not worthwhile to launch a robo-advisor for the sake of speed which tries (in vain) to avoid having to fulfil the requirements applicable to investment advice. Instead, the providers should make use of the opportunities offered by new media to provide full investment advice with the authorisation and under the supervision of BaFin and therefore make a contribution towards the creation of a consumer-friendly market environment.

Character of a personal recommendation

The decisive criterion for determining whether the information provided constitutes investment advice is whether the result generated by the robo-advisor has the character of a personal recommendation, i.e. whether the recommendation reflects the client's personal circumstances. If, on the other hand, the provider informs the client in a neutral manner, this does not constitute a recommendation. This applies for example to the provision of a search function, which selects from an existing product offering purely on the basis of objective product features. Unlike investment advice, portfolio management gives clients more than a one-off investment recommendation; instead their portfolio is managed on an ongoing basis. However, the securities account is kept with a depositary bank, and the asset manager is given power of attorney.