Name
Global FinTech Guide
Country _ Name
United States
SectionTitle
Asset and portfolio management
Body
FinTechs belonging to this category offer asset and portfolio management services via an internet platform or software programs and usually manage and dispose of the assets of their customers long or short term according to their specifications without actually holding the property or the possession of those assets. FinTechs, which provide information about and access to overnight or time deposit accounts at national and foreign banks and which execute the transactions to these accounts, also belong to this category. Some FinTechs however only act on request of the customer.

Aside from that some FinTechs offer software or internet solutions enabling users to manage and plan their personal finances on their own by providing graphics, overviews and compilations of their financial data and sometimes indicating financial risks or opportunities, but without actually managing the assets.

Introduction

Attitude of the country towards modern asset and portfolio management services

The United States boasts a dynamic and tech-forward investment and portfolio management sector. Many investment managers now operate primarily through digital platforms, including web-based and app-based solutions, rather than maintaining a physical presence. The adoption of tech-driven brokerage and asset management services is widespread, particularly among younger investors who favor innovative, user-friendly interfaces.

Legally, the U.S. Securities and Exchange Commission (SEC) has heightened its focus on the intersection of technology and investor behavior. While the SEC recently raised concerns about the “gamification” of financial technology platforms—such as the use of rewards, leaderboards, and interactive features that may encourage excessive trading and pose increased risks for investors their current focus is on promoting technology (particularly blockchain), harmonizing their rules with the Commodity Futures Exchange Commission (CFTC), guiding digital asset participants on compliance, and rolling back regulations enacted during the prior administration.

Legal affairs

Obligations and requirements to provide asset and portfolio management, or ancillary services described above

Asset and portfolio management services are regulated, with the specifics depending on the nature of the services provided. Depending on the services provided, asset managers could be either broker-dealers, investment advisers, or commodity trading advisors or, with respect to assets that are neither securities nor commodities, could fall outside of federal regulation. A broker-dealer is someone who effects transactions in securities, while an investment adviser is someone who provides investment advice with respect to securities, and a commodity trading advisor is someone who provides investment advice in respect of commodity interests.

The key regulatory frameworks include:

Broker-Dealers:

Broker-dealers are regulated under the Securities Exchange Act of 1934 (Exchange Act) at the federal level, and individual states have their own broker-dealer regulations. The Financial Industry Regulatory Authority (FINRA
), a self-regulatory organization, oversees broker-dealers in conjunction with the SEC and state regulators. Key requirements include:

  • Registration and Membership: Broker-dealers must file Form BD and a FINRA membership application. They are also required to be members of the Securities Investor Protection Corporation (SIPC). The application process generally takes up to 180 days, and changes in control of registered broker-dealers are subject to similar application processes. Application fees range from approximately $7,500 to $60,000, depending on the complexity and size of the firm. Registered representatives of broker-dealers are also subject to individual registration with FINRA and at the state level. 

  • Capital Requirements: Broker-dealers are required to maintain a minimum net capital of $250,000, though this amount can vary based on the specific activities and size of the broker-dealer. Certain types of broker-dealers, particularly those engaged in more complex or higher-risk activities, may be subject to higher net capital requirements.

  • Compliance Requirements:
  • Customer Protection Rule: This rule requires broker-dealers to have possession or control of fully paid or excess margin securities held for customer accounts.
  • Recordkeeping: Broker-dealers must maintain records of securities transactions, money balances, and securities positions. Records must be kept for at least six years, and they must be available for inspection by the SEC. This includes maintaining electronic records, such as e-mail communications.
  • Reporting Obligations: Broker-dealers must file quarterly and annual financial statements with the SEC. They must also notify the SEC of significant changes to their operations or financial status, including issues related to net capital.
  • Privacy and Fair Disclosure: Broker-dealers are required to provide privacy notices to customers annually, informing them about the sharing of their personal information. Additionally, under Regulation FD (Fair Disclosure), broker-dealers must provide equal access to material information to all investors.
  • Additional Compliance: Broker-dealers are also subject to a multitude of additional compliance requirements under SEC and FINRA rules and regulations.
Broker-dealers are not classified as fiduciaries under federal law, but in many circumstances they must adhere to suitability requirements and fair dealing standards that are similar to fiduciary duties.

Investment Advisers:
Investment advisers are primarily regulated under the Investment Advisers Act of 1940 (Advisers Act
) at the federal level.  Each state also has its own investment adviser regulations, many of which apply to the individuals who serve as investment adviser representatives. However, the regulatory framework depends on the amount of regulatory assets under management (AUM), and unlike other U.S. securities law regimes, generally the substantive provisions of only federal or state investment adviser laws would apply to the registrant itself:

  • Federal vs. State Regulation:
  • Federal Regulation: Advisers managing over $100 million in AUM must generally register with the SEC.
  • State Regulation: Advisers managing $100 million or less in AUM are generally regulated at the state level.
  • Registration Process:
  • Form ADV: Investment advisers must file Form ADV with the SEC or state regulators. This includes a Part 2 Brochure, which must be provided to all retail clients. Registration is automatically effective 45 days after filing Form ADV if there are no SEC comments.
  • Costs and Licensing: Licensing costs are generally low but vary by state and the amount of AUM. Investment adviser personnel may need state-specific licenses, which involve passing tests, fingerprinting, and background checks administered by FINRA.
  • Compliance and Fiduciary Duties:
  • Fiduciary Duties: Investment advisers owe a fiduciary duty to their clients, which includes a duty of loyalty and care.
  • Ongoing Compliance: Registered investment advisers must adhere to extensive compliance requirements, including:
  • Recordkeeping
  • Custody of client assets
  • Voting of client securities
  • Compliance policies and procedures
  • Restrictions: Advisers face several prohibitions and restrictions, including those related to marketing materials, the use of material non-public information, principal trading, cross-trading, political contributions, and performance fees.
    •  

    Commodity Trading Advisors: Advisors that provide investment advice with respect to commodity interests, such as futures, swaps, and hedges of currency, interest rates, volatility, bitcoin, or physical commodities like precious metals, natural resources, and agricultural products, are subject to significant regulation by the Commodity Futures Exchange Commission ( CFTC and the National Futures Association (NFA). 

    Unregulated Managers: A small subset of asset portfolio managers, such as those managing direct interests in real estate, certain tangible assets, or spot commodities, or those who qualify for exemptions as foreign private advisers, venture capital fund advisers, or private fund advisers, may not be subject to formal regulation.



    Additional comments regarding the legal situation for asset and portfolio management services or what FinTech’s must be aware of in this business area
    Asset managers and their personnel may need to obtain registrations or licenses in the states where they operate or serve clients.

    Additionally, managers of investment vehicles and certain structured products must be vigilant to avoid inadvertently issuing “investment company” securities. Under the Investment Company Act of 1940, such issuances may automatically subject those vehicles to registration as an investment company. This registration process is often expensive, complex, and impractical for many managers.

    FinTech platforms offering trading services must ensure they are not required to register as a securities exchange under the Securities Exchange Act of 1934. The SEC has enacted certain rules that expanded the definition ”dealer“ (targeting algorithmic traders) and reguate securities-based swap execution facilities. While broker-dealers and investment advisers are subject to different regulatory regimes, the SEC has been attempting to “converge” these regimes in recent years so that the customer experience is the same whether they are dealing with a broker-dealer or an investment adviser. That said, compliance requirements typically are higher for broker-dealers, while investment advisers are subject to fiduciary duties to which broker-dealers may not be subject.



    Economic conditions

    Market size for asset and portfolio management services and biggest companies in this business area

    The United States is a major hub for asset and portfolio management, holding nearly half of the world's assets under management. The top 10 investment advisers in the U.S. by AUM oversee over $43 trillion in assets. Key players in this sector include BlackRock, Vanguard, Fidelity, State Street, Morgan Stanley, and JPMorgan Chase. The extent to which these assets are managed through technology platforms remains largely unquantified.

    In the online trading space, prominent platforms include TD Ameritrade, E*TRADE, Fidelity, and Interactive Brokers. Newer entrants targeting younger investors, such as Robinhood, eToro, and SoFi, are gaining market share rapidly. Among the newer FinTech companies, Betterment, Wealthfront, and Acorns have made significant inroads. These robo-advisors and fintech startups attract growing assets by offering innovative, technology-driven investment solutions.



    Additional comments regarding the economic situation for asset and portfolio management services or what FinTech’s must be aware of in this business area

    Retail-focused asset management businesses generally face more regulatory scrutiny. FinTech companies should be aware of the heightened scrutiny they may encounter and ensure they adhere to evolving regulatory standards to avoid potential compliance issues. Furthermore, the manner in which FinTechs collect fees can affect the regulatory regimes to which they are subject.



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