Former Democratic Congressman and political gadfly Barney Frank spoke to a group of advisors some years ago, arguing against an increase in military spending because the Chinese “have no intention of closing shipping lanes in the South China Sea,” manmade islands notwithstanding.
In the next breath, he lamented that financial regulation failed to keep pace with innovation in the run-up to 2008, something he blamed for the resulting crisis. Following his remarks, more than one person noted that he seemed to trust the Chinese government more than the ingenuity of the American businessman.
It’s therefore fitting that a potential quash of robo-advice ingenuity would come from Massachusetts, Frank’s home state. Birds of a feather, as they say.
“Until regulators have determined the proper regulatory framework for automated investment advice, [robo-advisors] seeking state registration in the Commonwealth will be evaluated under the foregoing guidance on a case-by-case basis,” according to a recent policy statement from the Massachusetts Securities Division, which takes aim at the sector.
Seems innocuous enough, but given the Bay State’s regulatory environment since …oh, about the time it shed the shackles of British tyranny (the irony), color us worried.
We’ve noted the reasons for humans’ inherent rejection of new technology before, whether electricity as sorcery or cancer-causing electromagnetic radiation from clock radios—which, of course, always turned out to be bunk; and so it is with robo-advisors.
Of course they’re not perfect, but continual improvements are made—hence the word “innovation.” Even the most tech-averse Luddite knows that algorithms are now arranged in a way to make eventual outcomes incredibly precise. Think Google Car and predictions from proponents of the eventual extinction of car crashes and traffic.
Yet leave it to the government to, once again, slow the development of a product or service that the market demands from the private sector because they—like Barney Frank—always seem to know better. We’re not quite there yet with the capabilities robo-technology can provide, but if certain views on the role of regulation in public life are allowed to flourish, we never will be.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
