New UK robo-advice market entrant MoneyFarm has been criticised by the Financial Services Consumer Panel for not being clear with consumers about whether or not it gives advice.
In its response to the European Supervisory Authorities’ discussion paper on automation in financial advice, the panel stated providers could do much more to make it clear whether their service is regulated advice or not.
It argued several robo-advice services claim to offer advice when in fact they are not authorised to do so.
The panel named MoneyFarm as one business where it said it was not clear from its website whether the firm - which is authorised - gave regulated investment advice or not.
“One example is MoneyFarm which says on its homepage that ‘our advice is totally unbiased’. In its FAQs section, however, it says that it does not give investment advice, as it is a discretionary investment manager,” the response paper said.
“There is a similar lack of clarity on other automated advice websites. This underlines the need for clearer signposting of the protection available to investors, and for additional risk warnings on non-advised sales.”
Following the criticism, MoneyFarm has changed the wording on its website to reflect that it does, in fact, give regulated investment advice.
“MoneyFarm does give investment advice to users and we are authorised by the FCA to do so. The FAQs section of the website has been updated to clarify this point,” a spokesperson said.
“We believe that online wealth managers will help to deliver a better service and improved levels of advice to large parts of the market that have been largely ignored post Retail Distribution Review.”
Last month, the digital wealth manager launched in the UK, promising to shake up the industry, after building up a 60,000 strong user base in Italy since 2011.
Elsewhere in its paper, the consumer panel said an automated advice process should not allow for an immediate sale, but give the consumer time to consider the personalised recommendation made, along with an option to speak to a qualified advisor.
“Moreover, automated advice which is marketed as ‘independent’ should adhere to the same standards as face-to-face independent advice, notably the ban on commission for independent intermediaries introduced by MiFID II and the requirement to consider a sufficient range of different product providers’ products,” added the document.
The panel outlined the various providers attempting to crack to the nascent UK automated advice market, noting that LV and Just Retirement provide personal recommendations signed off by level four qualified advisers, accepting full liability and recourse to the ombudsman and compensation scheme.
“Other services are closer to the discretionary advice model, from specialists such as Money on Toast and Nutmeg to large investment firms including Brewin Dolphin and Hargreaves Lansdown,” the panel noted.
“The extent to which automated advice services establish investment objectives, suitability and risk can vary significantly between firms,” added the FSCP.