New UAE rule: Investors can now use 'robo-advisory' to help with stock, asset picks

Dubai: Stock market and other asset investors in the UAE can make use of 'robo-advisory' services to make informed choices when using trading platforms. But all such trading platforms need to ensure they are properly licensed.

The UAE regulator - Securities and Commodities Authority (SCA) - has now approved the regulation related to robo-advisory services. Such robo-advisory often costs a lot less than what portfolio managers come for, even though the element of risk is always there with any investment.

It was recently that the SCA moved to enforce strict licensing rules for social media 'finfluencers' in the UAE.

Whether it's on DFM or ADX or markets outside of the UAE, new investors are signing up to actively trade in stocks or other asset classes. According to trading platforms, there is significant interest in oil and gold futures among Gulf investors over recent weeks.

The move on allowing robo-advisors is thus the latest step by the SCA to open up investment options to a wider pool of users - but only through licensed trading platforms.

"Licensed portfolio management firms are now authorized to provide robo-advisory services exclusively through digital platforms that utilize AI technologies and advanced algorithms to deliver automated investment recommendations," said a statement.

"AI-powered robo-advisory services contribute to building balanced investment portfolios tailored to investors’ goals and risk tolerance, enhancing asset management efficiency and supporting the sector’s ongoing digital transformation."

Robo-advisory services have been hugely influential in the West, bringing in legions of new retail investors through trading platforms. This has played a part in the series of gains made by the US markets through recent years, even when the wider economy has had to cope with high inflation. (Another offshoot has been the rise in 'meme-stocks'.)

Robo-advisory utilize computer algorithms to help with investment portfolios, and more often than not come at a lower cost than traditional financial advisors.

“The regulation of the robo-advisor service is a clear manifestation of our strategic vision to build a forward-looking regulatory framework," said Waleed Saeed Al Awadhi, CEO of SCA.