Purpose This paper, an analytical one, aims to address how regulations in the USA designed to protect investors against conflicts of interest fall short of addressing risks from technologies used in retail investor-facing financial services. Current regulations protect investors through oversight of the recommendations or advice received from financial professionals. Technologies that interact with investors may not fit into such definitions, yet the potential negative risks to investors are similar whether through human advice or technological influences. Design/methodology/approach This paper uses desk research methodologies to analyze regulations and gaps in investor protection. A taxonomy is proposed, and case studies are presented that elaborate on the proposed taxonomy followed by proposed protocol for enhanced disclosure. Findings Investor-facing financial technologies may fall outside the US regulatory definition of financial advice or recommendation because they are designed to work in the background by nudging or influencing action. Nevertheless, if investors act based on that behavior, the potential negative financial risks are the same regardless of whether the investor is harmed by human financial advice or technological influences. To address this gap, a new term called “steering” is introduced, accompanied by a taxonomy describing how technology-led interactions can steer investors. A protocol that evaluates disclosure of conflicts of interest consistent with the proposed taxonomy is proposed. Originality/value This study is original because it addresses emerging investor-facing technologies that integrate AI-enabled features to influence investor behavior, a nascent area of research that has received little attention. Additionally, the research proposes a new term called “steering” to address gaps in US regulation, accompanied by a novel taxonomy and protocol for enhanced disclosure.
Filabi et al. (Tue,) studied this question.