Digital wealth managers have seen the UK regulator flag a number of areas where it sees disruptors needing to improve.
The UK regulator, the Financial Conduct Authority’s (FCA), review of automated investment services, such as robo-advice has been released.
Since the fast growing sector’s inception in the UK 4-5 years back the FCA has broadly been a supporter of robo-advisors as well as fintech firms in general.
The results of its review, published yesterday, show however that it sees some emerging problems with the models of robo advisors.
In the review the FCA examined seven firms offering automated online discretionary investment management and three firms providing retail investment advice exclusively through automated channels. Its criticism centred on a lack of disclosure, suitability assessments and how platforms deal with vulnerable customers.
Jon Greer, head of retirement policy at Old Mutual Wealth, says since pension freedoms, and the subsequent surge in defined benefit pension transfers, access to high quality financial advice is more important than ever.
“The Work and Pensions Committee recently called for a comparison of face-to-face with robo advice to better understand how automated investment and advice services to help fill the general advice gap,” he said.
Greer says we are likely to see more hybrid models which combine the strengths of face-to-face advice with those of an automated process as a result of the emerging regulatory issues highlighted in the review by the FCA.
“The journey to 24/7 financial advice provided by robots has not been as swift as anticipated and this review offers an opportunity for reflection on how technology best fits within the financial advice industry. Findings from the regulator’s further investigations will be hotly anticipated,” he added.
IFA Group LEBC’s director of public policy, Kay Ingram says robo advice with no human intervention is unlikely to be suitable for those who need to make strategic financial decisions
“For example, [how best] to prioritise competing demands on their time and money. At the same time, we must recognise that face to face is today beyond the financial reaches of many individuals,” she said,
“We believe the balance lies in bionic advice, which combines technological efficiencies with human empathy. Through bionic advice we are making quality advice accessible to greater numbers of people at a more affordable cost, retaining at the same time the important sense checking which only emotional intelligence can provide.”
Join AltFi at their fourth annual Australasia Summit to examine the future of lending in Australia. Where we present best practices across, technology, partnerships, open banking, governance, data access, consumer experience, capital markets & funding, the role of government and regulation.