Your IndustryMay 13 2016

FCA fails to meet robo-developers’ expectations

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
FCA fails to meet robo-developers’ expectations

Software firms seeking to enter the robo-advice market have been disappointed by the Financial Conduct Authority’s Project Innovate, according to Mark Spiers.

The head of banking, investments and lending at regulatory consultancy firm Bovill said he is working with a number of technology companies keen to move into the nascent automated advice market.

But many potential new entrants expected a collaborative approach with the regulator they have found lacking, he said.

“They are not geared up for that and you get signposting with a smile. It is all about expectation management. For those of us who are in this business already, we know that the FCA will never give you an opinion unless you are wrong,” Mr Spiers said.

“I think some of the new entrants would want to see a more collaborative approach, but have not processed the fact that the FCA is a regulator, not a consultancy firm.”

However the FCA defended Project Innovate, saying it has attracted plenty of interest since its launch in October 2014.

Described as a ‘sandbox’, it is designed to allow businesses to test out new, innovative financial products, services or business models without incurring all the normal regulatory consequences of engaging in those activities.

An FCA spokesperson said the regulator has been approached by 500 firms and has helped more than 200 through Project Innovate.

The Financial Advice Market Review has also precipitated a new ‘Advice Unit’ within the FCA, focusing on the development of automated advice, due to be open for business from May.

Mr Spiers said he had “quite a few” clients who were working towards some form of robo-advice, suggesting a demarcation between those that have worked in financial services in the past and see this as a new and interesting area and those people who are specific software providers looking at this as an area where they can add value with their expertise.

“Some of our larger clients are seeing some potential pressure from new entrants who want to reduce costs and are looking at a robo-advice solution.”

When asked to respond to criticism from software providers that the FCA has failed to be “collaborative”, a spokesman for the regulator said through Project Innovate it has received 488 requests for support and supported 53 per cent of these firms.

Those it did not support were generally because they did not meet its eligibility criteria and in some cases because the idea was already established.

“We ask all firms that approach us to fill out a survey and tell us about their overall experience of the Innovation Hub, from the responses we have received 73 per cent have said their experience was good or excellent,” added the regulator.

Adviser view

Kevin Morgan, managing director of Hertfordshire-based Consilium Financial Planning, said: “As an individual regulated firms we have to interpret the rule book and ensure we carry out the regulation in the spirit as well as the work of the rules but if you ask the FCA a specific question you never get a yes or no answer so the onus has got to be on these organisations to invest in a knowledge base of the FCA.”