RegulationDec 16 2015

EU regulators express robo-advice concerns

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EU regulators express robo-advice concerns

Rising use of robo-advice could lend itself to risks with use, a discussion paper from the joint committee of the three European financial supervisory authorities has claimed.

The 35-page paper has been published because the three authorities - the EBA, Esma and Eiopa - have witnessed a growing number of financial institutions offering automated tools when providing advice or recommendations to consumers.

Because of the potential risks and benefits of the rise of robo-advice, the authorities have asked for input from the financial services industry to find out whether they should intervene with regulation.

Steven Maijoor, chairman of the joint committee and chairman of Esma, said: “Financial innovation is important and, at its best, contributes to economic growth.

“However, this can only be achieved and sustained where consumers have confidence in such innovations.

“Our role as European supervisory authorities is to monitor new financial activities and to take action where appropriate.”

The paper said the use of robo-advice could have both positive and negative effects, such as a bigger number of people seeking advice and the increased vulnerability to IT failures.

It said: “The European supervisory authorities are of the view that, even though automation in financial advice is not presently observed equally across all financial sectors and/or EU member states, the phenomenon has the potential to continue to grow.

“The European supervisory authorities will assess the feedback to this discussion paper to better understand the phenomenon and to decide which, if any, regulatory and/or supervisory action is required.”

This week Atos, the European IT services corporation, launched a digital service to allow wealth managers, banks and insurers to help their customers manage their personal finances better.

Michael Davison, industry principal for financial services at Atos, said: “Banks, wealth managers and insurers understand that their customers now expect value-added services which are delivered at a time of their choosing and on any digital device.

“This solution delivers on the promise both to empower the customer digitally and to drive customer retention based on value.”

The discussion paper is available on the websites of the three authorities and the closing date for responses is 4 March 2016.

Adviser view

Pete Matthew, managing director of Cornwall-based Jacksons Wealth Management, said: “I don’t think more regulation is needed. What we need is more intelligent regulation.

“Robo-advice is so new, particularly in Europe, that there is a danger of regulating it to death before it has even had a chance to take a breath.”