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Consumer interest in automated investment advice continues to grow. One informed observer recently predicted that automated investment advisers may manage $2 trillion in assets by 2020.Today, the two largest automated investment advice providers now manage approximately seventeen billion in assets while continuing to expand their capabilities. This rise of automated investment advice firms may disrupt and improve the market for investment advice and finally allow modem technology to make financial intermediation more efficient. For a variety of reasons, costs in the sector have remained abnormally high. One study found that "the unit cost of intermediation is about as high today as it was at the turn of the twentieth century."' The sector's puzzlingly high costs have persisted even though technology "should lower the physical transaction costs of buying, pooling, and holding financial assets."

In this article, Professor Benjamin Edwards reviews the tremendous market-disrupting potential automated investment advice firms present as well as some challenges and possible roadblocks ahead. The article opens by discussing the conflicted advice problem for the retail investing market and the cast of professionals that now serve this market in Part I. In Part II, the article reviews automated investment advice's disruptive potential and explores some potential regulatory and policy concerns about automated investment advice.

Publication Citation

93 Chi.-Kent L. Rev. 97 (2018).