Robo-advice has become a widely-known concept in the financial advice community over the past 12 months, as more and more firms launch their own proposition.
But, just as the rest of the world is adapting to the ubiquitous use of algorithms, so advisers adopting robo-advice need to be aware of their responsibilities to their clients, and how much liability they are taking.
David Strachan, head of Emea centre for regulatory strategy at Deloitte, said: "It's not entirely straightforward; like everything else it's something that needs to be undertaken with a full understanding of the risk issues and challenges.
"There's the risk that the customer ends up with a wrong product, which is mis-selling, which the industry wants to avoid. To get the algorithm right is essential, and we think there's a number of ways this happens – through the governance of the process and testing the algorithm."
In addition, it is important to have someone understanding the algorithm from the client experience, and for advisers to grasp the inputs into the algorithms.
Mr Strachan's comments follow the publication of Deloitte's report into robo-advice where the consultant has surveyed the market and drawn conclusions about its future evolution.
One of the areas that needs to be tackled, according to Mr Strachan, is the grey area between fully automated guidance and full-on advice.
Mr Strachan said: "Where does the boundary lie between guidance, which is unregulated, and regulated advice, which by definition is regulated – how clear is the boundary between them? There are some areas where it's very clear where the service is only guidance, and does not result in specific advice or a recommendation, and regulated advice where there is a detailed fact-find.
"There's a grey area in the middle which is: where exactly does guidance cross over to regulated advice?"
The general assumption is that advisers take a risk-averse view and assume the service being provided is regulated. However, this increases the compliance costs, which would be passed on to the customer, who may balk at the extra costs.
The report, The Next Frontier: The Future of Automated Financial Advice, outlines the amount people will be prepared to pay for the use of a robo-adviser. By the far the largest cohort said they would be prepared to pay £125, with popularity rapidly declining the more the price goes up.
Automated advice on investing £11,000 charged at £225 only received support from 16 per cent of people, while a £360 fee saw support from 6 per cent.
The report said: "We believe low-cost solutions are commercially viable. For large-scale providers the £125 price point maybe achievable as evidenced by annual management charges of 45 basis points.
"We recognise that a digital asset allocation solutions using mainly passive investments is likely to be the best means of offering low-fee automated advice that achieves acceptable returns for providers.
"For wealthier investors, this solution may also incorporate active investments."