Tue. Feb 25th, 2020

Planet Compliance

Innovation & Regulation in Finance

Robo-advice slowly growing but market still limited European Regulators find

3 min read

While Robo-adviceor the automation of financial advice is slowly growing, the overall number of firms and customers involved is still quite limited, a report published by the three European Supervisory Authorities (ESAs) found. The ESAs consist of the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), and the Joint Committee is a forum with the objective of strengthening cooperation these three agencies. Today they published the results of their monitoring exercise on automation in financial advice. The Report shows that while the phenomenon of automation in financial advice seems to be slowly growing, the scale of market remains limited.

The regulators stated that the risks the ESAs had identified as part of the 2015 JC Discussion Paper (DP) on Automation in Financial Advice and the 2016 Report on the same topic have not materialised and considering the limited growth of the phenomenon, they believe that no immediate action is necessary at this point in time.

The latest report is a new analysis that has been done through a survey with national competent authorities (NCAs) on the evolution of ‘automation in financial advice’ in the securities, banking and insurance sectors over the past two years.

Through this Report, the risks and benefits of this phenomenon, which had previously been identified by the ESAs have largely been confirmed by national competent authorities (NCAs) and remain valid.

In terms of emerging business models, it appears that these kind of automated services are being offered, through partnerships, by established financial intermediaries, rather than by pure FinTech firms and while some new trends seem to emerge (such as the use of Big Data, chatbots and extension to a broader range of products) there seems to have been no substantial change to the overall market since the publication of the ESA Report in 2016.

Considering the results of the analysis, in terms of limited growth of the phenomenon and lack of materialisation of the identified risks, no immediate ESAs action appears to be necessary. The report concludes that a new monitoring exercise will be conducted if and when the development of the market and market risks warrant this work.


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