The discussion paper - launched by the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority - aims to assess the benefits and risks of so-called ‘robo-advice’.
This follows the increasing digitalisation of financial services, with a growing number of financial institutions now offering automated tools, such as algorithms and decision trees, when giving advice or recommendations to consumers.
Steven Maijoor, chair of the joint committee, said that financial innovation is important and can contribute to economic growth. “However, this can only be achieved and sustained where consumers have confidence in such innovations.”
By opening up the debate and examining this potential shift in the way financial institutions interact with consumers, the three authorities stated that they are able to “take action where appropriate”.
The authorities identified potential benefits, including lower costs, higher consistency of advice and a bigger number of customers that can be reached.
However, the potential risks could include the inability of consumers to talk to a human adviser who can guide them through the process and provide clarifications, as well as the increased vulnerability to various types of IT failures.
The discussion paper can be found on all three websites. The closing date for responses is 4 March 2016.
Earlier today (14 December) Anthony Morrow, founding shareholder of IFA group Paradigm, and Duncan Cameron, co-founder of Moneysupermarket, are planning to launch a new online advice business called eVestor.
Based in Wilmslow, Cheshire, the venture is expected to launch in 2016, combining an “effortless user experience” with integrated regulated advice, to make investing more accessible and affordable.
The investment solution will be tailored to specific needs and made available via traditional wrappers, including pensions and Isas.
The service will cost 0.44 per cent, which is made up of 35 basis points for product, advice and investment, with 9 bps for fund charges.