FCA to probe suitability in robo-advice review

FCA to probe suitability in robo-advice review

The Financial Conduct Authority will be carrying out an assessment of the suitability of automated advice.

It watchdog revealed the move in its evidence to the Work and Pensions Select Committee as part of MPs review into pension freedoms.

The committee had asked whether there were persistent gaps in the advice and guidance market and what might fill them.

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In response, the FCA said: “The Financial Advice Market Review identified automated advice as one potential solution.

“The market is currently relatively small. Barriers to the market include consumer inertia and the lack of incentive for firms to provide this service given that most defined contribution pots are relatively small.

“We have created a dedicated Advice Unit to support firms developing automated advice models.

“As set out in the FCA Business Plan 2017/18, we will be undertaking an assessment of the developing market for automated-advice models.

“The work will test the suitability of the advice provided and also consider how firms support customers pre- and post-advice, their governance of service and the related risks.”

The FCA did not comment on when the review would start and how long it would take.

It also provided the committee with figures relating to how people were using the pension freedoms.

For example, it highlighted that the number of non-advised drawdown sales is currently on the rise at 30 per cent, compared to 5 per cent before pension freedoms.

In response to drawdown sales trends, earlier this year the FCA launched a thematic review into the sale of drawdown products to non-advised consumers.

The FCA said: “The review is looking at what steps we can take in the future to help consumers who do not get advice.

“We are also looking at how firms are complying with the existing rules, including whether they are providing adequate information to enable consumers to make an informed decision.”