The Iranian Association of Islamic Finance held an international webinar on “AI- Driven Islamic Fintech and Robo-Advisors (Robo-Muftis)”, on September 14 .

Speaker:

Dr. Hakimah Yaacob

Head of Postgraduate Studies faculty of Islamic economics and finance, Sultan Sharif Ali Islamic Uni, Brunei Darussalam

Consultant, Bank Islam Brunei Darussalam

Former Senior Researcher, Central Bank of Malaysia

Shariah Adviser Standard Chartered Malaysia,

Legal Compliance Adviser Al Baraka E Wallet,

Robo-advisor also offers personalized financial and investment advice, as well as monitoring and re-balances investors’ portfolios regularly. The Robo-Advisors segment contains private asset management providers who offer automated online portfolios in which private investors can choose investment volumes depending on their scope and, private appetite for risk. Providers such as Wealthfront, Schwab, Intelligent Portfolios, Wahed Invest, and Betterment allow private and/or institutional investors to invest their money (starting at very small amounts) in pre-existing portfolios, which are automatically managed by individually configured algorithms.
Series of regulations are currently mushrooming under various jurisdiction such as the Securities and Exchange Commission (SEC) in the United States, the US advisers Act of the 1940, Registered Investment Advisers RIAs are subjected to the imposed functional obligation have duty to provide advice in the best of their client investment interest, and if Robo-advisors hold an asset related to a customer, they would have to register with SEC and FINRA Financial Industry Regulatory authority as broker-dealers. In the year 2017, the division of Investment Management of the Securities and Exchange Commission, SEC, released regulatory compliance for Robo-advisors. Robo-mufti utilizing a concept where Robo-advisers investments are made and channel to shariah-compliance portfolios utilizing robo-mufti or smart mufti tracking the algorithm based on the feeds in the system. Smart mufti is intended to provide a platform utilizing an algorithm that understands Shariah fatwas from the data / historical feed. Robo Advisers are used to maximize the investment portfolios for investors via specific algorithm and mathematical-based through Automated Investing. Despite the increasing usage and pro-Robo Advisers, the clarity on the terminology requires serious attention. The term mufti and fatwa trigger sensitivity for certain figure position that attracts shariah issues. In some jurisdictions, if fatwa is in a gazette, then it becomes the law binding on the people residing within that jurisdiction to comply. If this is allowed, the law in the future will lie in the hands of robots, which again contradicts the nature of Islamic finance to acknowledge the presence of ulama alongside the industry. we have guidance from the court of law that Robo-advisers, like other human certified financial advisers, must ensure that their marketing materials are not misleading and that conflicts are disclosed to investors. In succinct, Robo investors gained traction and investors with different risk-appetite. However, serious attention is needed to ensure governance, shariah audit and shariah compliance are observed and complied with.