Regulation 

Robo disruption to benefit those with good tech

Robo disruption to benefit those with good tech

Big providers able to bring robo-advice to the mass market will be a boon to retail investors but not to established providers, research by a financial software provider has claimed.

The prospect of a digital giant entering the market posed the biggest threat for 50 per cent surveyed by Misys, who provide solutions to 2000 customers across 130 countries.

Out of 200 surveyed, 38 per cent feared the advance of robo-advise while 13 per cent thought client-facing digital disrupters posed a threat to the industry.

James Pinnington, Misys’s head of investment management for northern Europe, said disruption was rife in financial services, with asset management the next to face the music. He said: “While new challengers will likely launch with strong digital distribution models, traditional asset managers will win out with even stronger diversification in asset class coverage.

“But 75 per cent of asset managers declare that system interoperability is the biggest barrier to asset class diversification. Technology will be the enabler to success for both traditional and start-up asset managers.”

According to a survey conducted by Vanguard in November, two out of five wealth managers viewed robo-advice as a threat to their business.

The Financial Advice Market Review, the joint FCA and Treasury consultation which closed to submissions on 22 December, also alluded to robo-advice as an option to help bring advice back to the market.

The FCA stated that new and emerging technologies presented opportunities and challenges to provide cost effective, efficient and user friendly advice services.

Meanwhile, the European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority - launched a discussion paper in December that aimed to assess the benefits and risks of robo-advice.

The closing date for responses is 4 March 2016.

Background box

A survey by the IFA resource website Adviser Home, asking what advisers would like to see come out of FAMR, and how they would address the advice gap, showed a “genuine enthusiasm” for using technology, such as using automated systems to increase efficiency.

Brendan Llewellyn, director at Adviser Home, said: “Those against robos were staunchly so, while those who weren’t were largely agnostic, stating that they’ll wait to see what the propositions look like and whether the regulator will give any more clarity on potential liabilities.”