What is digital investment advice

Digital investment advice (robo-advisor) means generalized or personalized advice provided by an automated financial product advisor, using algorithms and technologies without involving direct human participation. Such advisors may be individual companies and platforms, or they may operate within financial institutions.

How does digital investment advice work

A digital analysis of the profile of potential investor is carried out, during which questions are asked to clarify the investor's knowledge and experience in the financial market, the investor's objectives and the expected investment period, risk tolerance, as well as the financial position of the investor.

According to information provided by the investor, the digital advisor makes recommendations on investment opportunities.

Having consulted recommendations by the digital advisor, the investor makes a choice – to invest or not.

After making the investment, the investor may follow the changes in its investment portfolio value.

Pros and cons


  • Low commission 
  • Does not require much resources to start investing
  • Unlimited number of service investors
  • Immediate responses and offers on the investment opportunities
  • Advice is available 24 hours a day
  • Easily perceptive information
  • Service is transparent
  • Advisor makes objective and consistent recommendations
  • Less error risk
  • Process is documented and audited


  • Digital advisors are unable to ensure emotional relationship with the investor
  • Digital advisors are unable to assess specific cases
  • Digital advisors usually provide only basic investment services

Guidelines of the European Securities and Markets Authority

The service provider should take into account:

  • whether the information provided by the customer is sufficient for the service provider to conclude that the recommendations are justified;
  • whether the questionnaire is sufficiently clear to each customer;
  • whether the customer has access to advice provided by a human;
  • whether steps have been taken to prevent inconsistent customer responses.

The service provider should inform the customers of:

  • access to advice provided by a human;
  • the fact that customer responses will have a direct impact on the recommendations of the digital advisor;
  • the sources of information used to develop recommendation for a particular customer;
  • a process on how and when the customer information will be updated.


Within the meaning of Section 3 (4), Clause 5 of the Financial Instrument Market Law (FIML) digital investment advice (robo-advice) is an investment service, and the service providers therefore should have a licence to provide investment advice.

In order to obtain a licence for the provision of investment service and ancillary investment service, the investment firm should have to submit an application to Latvijas Banka to obtain the licence. In the application, investment services and ancillary investment services should be specified which the service provider intends to provide, accompanied by the documents laid down in Section 107 of the Investment firm law.

Laws and regulation binding on the provision of investment advice:

  • Suitability of Investment Service and Ancillary Investment Service and Conformity Thereof with the Interests of a Client (FIML, Section 126.2(11) and (2));
  • Regulation No 2017/565; Section 3: Assessment of suitability and appropriateness (Article 54, Article 55, Article 56).

Consultations with experts of Latvijas Banka

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