Regulators are just now starting to leaven their enthusiasm for robo advisory solutions with questions around core assumptions. How robust are the underlying algorithms and risk models? Will they be able to handle a black swan event or sustained market downturn?

To date, the transparency enforced upon fees has not been applied to portfolio risk. This opacity has prevented investors from understanding the true costs they are paying for portfolio management services, as well as how these costs are calculated. Robo advisors increasingly will be called upon to apply their core principles of transparency to risk assessment and other operational processes, as well as to share more information on their investment models....